On behalf of the Board of Directors and management
of TransAlta Corporation (the “Company”), you are cordially invited to attend our 2022 Annual and Special Meeting of
Shareholders (the “Meeting”), which will take place in a virtual-only meeting format on Thursday, April 28, 2022, at
11:00 a.m. (Calgary time). As a result of the continuing impact of COVID-19, and to mitigate risks to the health and safety of our
communities, shareholders, employees and other stakeholders, we will hold our annual meeting in a virtual-only format, which will
be conducted using a live audio webcast. Shareholders will have an opportunity to participate at the Meeting online regardless of
their geographic location.
Attached are the Notice of Annual and Special
Meeting of Shareholders and the Management Proxy Circular. The Management Proxy Circular contains details of the business to be conducted
at the Meeting and provides information with respect to our executive compensation program, as well as information on our strong
governance practices. During the Meeting, we will receive our audited consolidated financial statements for the year ended December
31, 2021, and the auditors’ report, elect the directors, reappoint the auditors and authorize the directors to fix their remuneration,
participate in the advisory vote on our approach to executive compensation (say on pay), and continue our shareholder rights plan.
Please take the time to review the Management Proxy Circular and provide your vote on the business items to be considered at the
Meeting. Your vote and participation are very important. In 2021, we were pleased to have 185,645,958 votes cast in person or by
proxy at the annual meeting of shareholders, representing 68.79% of the eligible common shares. We encourage shareholders to equally
participate at this year’s Meeting. If you are unable to attend the Meeting, you can vote by telephone, via the internet or
by completing and returning the enclosed form of proxy or voting instruction form. Please refer to the “How to Vote”
section of the Management Proxy Circular for more information. We encourage you to visit our website at any time before the Meeting
as it provides important information about the Company.
We encourage you to review the letter to
shareholders in our annual report, which outlines our performance in 2021.
We look forward to your participation at
the Meeting.
This Proxy Circular (as defined herein) includes
“forward-looking information”, within the meaning of applicable Canadian securities laws, and “forward-looking statements”,
within the meaning of applicable United States (“US”) securities laws, including the United States Private Securities Litigation
Reform Act of 1995 (collectively referred to herein as “forward-looking statements”).
All forward-looking statements are based on our
beliefs as well as assumptions based on information available at the time the assumption was made and on management’s experience and
perception of historical trends, current conditions, results and expected future developments, as well as other factors deemed appropriate
in the circumstances. Forward-looking statements are not facts, but only predictions and generally can be identified by the use of statements
that include phrases such as “may”, “will”, “can”; “could”, “would”, “shall”,
“believe”, “expect”, “estimate”, “anticipate”, “intend”, “plan”, “forecast”
“foresee”, “potential”, “enable”, “continue” or other comparable terminology. These statements
are not guarantees of our future performance, events or results and are subject to a number of significant risks, uncertainties and other
important factors that could cause our actual performance, events or results to be materially different from that set out in the forward-looking
statements.
In particular, this Proxy Circular contains forward-looking
statements including, but not limited to, forward-looking statements pertaining to: the Company’s strategic plan and targets, including
its current ESG targets (as defined below); the practices of the Company relating to workplace diversity, including that the Company
will have 50% women on the Board of Directors and 40% women across the workforce by 2030; the Company’s environmental targets;
the strategic objectives of the Company and that execution of the Company’s strategy will realize value for Shareholders; optimizing
and diversifying our existing assets and further expanding our overall portfolio in Canada, the US and Australia; investments in a range
of clean and renewable technologies; and our executive compensation philosophy and practices, including the mix of short- and long-term
incentives; the Company’s governance policies; the Company’s desire to grow an internal talent pipeline; the Company’s assumptions about
the growth of pension plans; and the Company’s response to COVID-19.
The material factors and assumptions used in
the preparation of the forward-looking statements contained herein, which may prove to be incorrect, include, but are not limited to,
the assumptions set forth herein and in management’s discussion and analysis and the Company’s annual information form dated as of February
24, 2022. By their nature, forward-looking statements are not guarantees of future performance, events, results or actions and are subject
to a number of significant risks, uncertainties, assumptions and factors that could cause our actual plans, performance, results or outcomes
to differ materially from the forward-looking statement. Factors that may adversely impact what is expressed or implied by forward-looking
statements contained in this Proxy Circular include, but are not limited to, risks relating to: the impact of COVID-19, including as
it pertains to supply chain, labour and counterparty credit risk; fluctuations in demand, market prices and the availability of fuel
supplies required to generate electricity; changes in demand for electricity and capacity and our ability to contract our generation
for prices that will provide expected returns and replace contracts as they expire; changes in the current or anticipated legislative,
regulatory and political environments in the jurisdictions in which we operate; environmental requirements and changes in, or liabilities
under, these requirements; existing or potential legal, regulatory or contractual disputes or proceedings; outcomes of investigations,
disputes and proceedings; changes in general economic conditions including interest rates; operational risks involving our facilities,
including unplanned outages at such facilities and our ability to return these facilities to service in a timely manner; equipment failure
and/or our ability to conduct the repair and maintenance to our equipment, either directly or through a third party, in a timely and
cost-efficient manner or at all; disruptions in the transmission and distribution of electricity; the effects of weather and other climate-change-related
risks; unexpected increases in cost structure; inability to access fuels necessary for the operation of the facilities, including natural
gas, solar, water or wind resources; failure to meet financial expectations; natural or man-made disasters, including those resulting
in dam or dyke failures; the threat of domestic terrorism and cyberattacks; commodity risk management and energy trading risks; industry
risk and competition; the need to engage or rely on certain stakeholder groups and third parties; fluctuations in the value of foreign
currencies and foreign political risks; the need for and availability of additional financing and our ability to obtain such financing
at competitive rates or at all; structural subordination of securities; counterparty credit risk; changes in credit and market conditions;
changes to our relationship with, or ownership of, TransAlta Renewables Inc.; risks associated with growth strategies, development projects
and acquisitions, including capital costs, permitting, labour and engineering and execution and integration risks; changes in expectations
in the payment of future dividends, including from TransAlta Renewables Inc.; inadequacy or unavailability of insurance coverage; the
effect of a credit rating downgrade on our energy marketing business and the impact on our financing costs; our provision for income
taxes;supply chain risks (not relating to the impact of COVID-19); reliance on key personnel, and ability to promote key personnel; labour
relations matters; and development projects and acquisitions.
Readers are urged to consider these factors carefully
in evaluating the forward-looking statements and are cautioned not to place undue reliance on them, which reflect the Company’s expectations
only as of the date hereof. The forward-looking statements included in this document are made only as of the date hereof and we do not
undertake to publicly update these forward-looking statements to reflect new information, future events or otherwise, except as required
by applicable laws. In light of these risks, uncertainties and assumptions, the forward-looking statements might occur to a different
extent or at a different time than we have described or might not occur at all. We cannot assure that projected performance, results
or events will be achieved.
The Company evaluates its performance and the
performance of our business segments using a variety of measures. Certain of the financial measures contained in this Proxy Circular,
including earnings before interest, tax, depreciation and amortization (“EBITDA”), funds from operations (“FFO”)
and free cash flow (“FCF”), are not standard measures defined under International Financial Reporting Standards (“IFRS”)
and may not be comparable to similar measures presented by other entities. These measures have no standardized meaning under IFRS and
should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Non-IFRS measures are presented
to provide management and investors with an understanding of our financial position and executive compensation programs. Certain additional
disclosures and reconciliations for these non-IFRS financial measures have been incorporated by reference and can be found beginning
on page M44 under the “Additional IFRS Measures and Non-IFRS Measures” section of our Management Discussion and Analysis for
the year ended December 31, 2021, filed with Canadian securities regulators on www.sedar.com and the SEC on www.sec.gov.
NOTICE IS HEREBY GIVEN that an annual general
and special meeting (the “Meeting”) of the holders (“Shareholders”) of common shares of TransAlta Corporation (“TransAlta”)
will be held on April 28, 2022, at 11:00 a.m. (Calgary time) in a virtual-only meeting format via live audio webcast at https://web.lumiagm.com/425458825
to:
The Management Proxy Circular dated March 18,
2022, of the Company and the form of proxy or the voting information form for the Meeting accompany this Notice of Annual and Special
Meeting. You should carefully review all information contained in the Management Proxy Circular before voting.
This year, the Company is holding the Meeting
by way of a live webcast. This webcast is intended to ensure the health and safety of our shareholders and employees as we continue to
take reasonable precautions in response to the COVID-19 pandemic and will allow registered shareholders and duly appointed proxyholders
to participate, ask questions, and vote at the Meeting through an online portal. Accordingly, if you are a registered shareholder, you
may participate via the live webcast of the Meeting through the online portal at https://web.lumiagm.com/425458825 non-registered
(or beneficial) Shareholders may also listen to a live webcast of the Meeting through https://web.lumiagm.com/425458825, but will
not have the ability to vote virtually or ask questions through the live webcast unless they are duly appointed and registered as proxyholders.
The Company has elected to use the notice-and-access
provisions under National Instrument 54-101 — Communication with Beneficial Owners of Securities of a Reporting Issuer and
National Instrument 51-102 — Continuous Disclosure Obligations (“Notice-and-Access”) for distribution of the Meeting
materials to registered and beneficial Shareholders. Notice-and-Access allows the Company to post electronic versions of its proxy-related
materials on the System for Electronic Document Analysis and Retrieval (“SEDAR”) and on its website at www.transalta.com/investor-centre/reports-and-filings,
rather than mailing paper copies to registered and beneficial Shareholders.
Under Notice-and-Access, instead of receiving
printed copies of the Meeting materials, registered and beneficial Shareholders receive a Notice-and-Access notification containing details
of the Meeting date, location and purpose, as well as information on how they can access the Meeting materials electronically.
If you would prefer to receive a paper copy of
the Meeting materials, free of charge, or if you have any questions regarding Notice-and-Access, you can contact our transfer agent,
Computershare Trust Company of Canada, at 1-866-962-0498.
Requests for paper copies should be made as soon
as possible but must be received no later than April 6, 2022, in order to allow sufficient time for Shareholders to receive and review
the Meeting materials and return the proxy form or voting instruction form prior to the proxy deadline.
Shareholders who are unable to attend the Meeting
are requested to complete, date and sign the enclosed form of proxy (or voting instruction form, as applicable) and return it, in the
envelope provided, to Computershare Trust Company of Canada, Proxy Department, 8th Floor, 100 University Avenue, Toronto, Ontario, M5J
2Y1, so that it is received no later than 11:00 a.m. (Calgary time) on April 26, 2022, or, if the Meeting is adjourned or postponed,
no later than 48 hours (excluding Saturdays, Sundays and holidays) before the time of the adjourned or postponed Meeting.
This Management Proxy Circular (“Proxy Circular”)
is dated March 18, 2022, and is provided to Shareholders in connection with the solicitation of proxies by and on behalf of the management
of TransAlta Corporation (“TransAlta”, “Company”, “we” and “our”) and the Board of Directors
of the Company (the “Board”) for use at the Annual and Special Meeting of Shareholders of the Company (the “Meeting”),
to be held at 11:00 a.m. (Calgary time) on April 28, 2022, or any adjournment or postponement thereof.
This Proxy Circular was provided to you because
at the close of business on March 18, 2022, the record date set for the Meeting, you owned TransAlta common shares. As a Shareholder,
you have the right to attend the Meeting and vote your TransAlta common shares in person or by proxy, as more fully described under “How
to Vote” further below.
Solicitation of proxies will be primarily by
mail, but may also be undertaken by way of telephone, fax, email, in person, over the Internet, by oral communication or other means
of communication by the directors, officers, employees, consultants or agents of the Company and its subsidiaries, at no additional compensation.
All costs associated with the solicitation of proxies by or on behalf of the Company will be borne by the Company.
TransAlta may use the Broadridge QuickVote™
service to assist beneficial Shareholders with voting their common shares over the telephone.
You will find additional information regarding
our business in our annual information form for the fiscal year ended December 31, 2021, as well as our audited consolidated financial
statements and accompanying management’s discussion and analysis for the fiscal year ended December 31, 2021. Copies of these documents
along with our other public documents are available on our website at www.transalta.com, on the System for Electronic Document
Analysis and Retrieval (“SEDAR”) at www.sedar.com and on the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”)
system at www.sec.gov.
Unless stated otherwise, the information in this
Proxy Circular is as of March 18, 2022, and all dollar amounts are expressed in Canadian dollars.
If you held common shares at the close of business
on March 18, 2022 (the “Record Date”), you are entitled to attend the Meeting, or any adjournment or postponement thereof,
and vote your common shares. Each TransAlta common share represents one vote.
At the close of business on March 18, 2022, there
were 271,678,482 common shares issued and outstanding. Our common shares trade under the symbol “TA” on the Toronto Stock Exchange
(“TSX”) and under the symbol “TAC” on the New York Stock Exchange (“NYSE”). As of the close of business
on March 18, 2022, we also had 9,629,913 Series A preferred shares, 2,370,087 Series B preferred shares, 11,000,000 Series C preferred
shares, 9,000,000 Series E preferred shares, 6,600,000 Series G preferred shares and 400,000 Series I preferred shares issued and outstanding.
Our Series A, B, C, E and G preferred shares trade under the symbols TA.PR.D, TA.PR.E, TA.PR.F, TA.PR.H, and TA.PR.J, respectively, on
the TSX. All of the outstanding Series I preferred shares are held by an affiliate of Brookfield Asset Management Inc. and are not publicly
traded. The holders of our preferred shares do not have rights to receive notice of, to attend, or to vote at the Meeting.
To the knowledge of our directors and officers,
the below table sets out the only persons, firms or corporations, owning of record or beneficially, controlling or directing, directly
or indirectly, 10% or more of the issued and outstanding common shares:
The Company has elected to use the notice-and-access
provisions under National Instrument 54-101 — Communication with Beneficial Owners of Securities of a Reporting Issuer and
National Instrument 51-102 — Continuous Disclosure Obligations (“Notice-and-Access”) for distribution of the Meeting
materials and the Company’s annual report, consisting of the audited consolidated financial statements for the fiscal year ended
December 31, 2021, together with the auditor’s report therein and related management’s discussion and analysis, to both registered
and beneficial Shareholders (collectively the “Annual Report”). Notice-and-Access allows the Company to post electronic versions
of these materials on SEDAR and on its website at www.transalta.com/investor-centre/reports-and-filings, rather than mailing paper
copies to registered and beneficial Shareholders. Under Notice-and-Access, instead of receiving printed copies of the Meeting materials
and Annual Report, registered and beneficial Shareholders receive a Notice-and-Access notification containing details of the Meeting
date, location and purpose, as well information on how they can access the Meeting materials and Annual Report electronically.
If you would prefer to receive a paper copy of
the Meeting materials or Annual Report, free of charge, or if you have any questions regarding Notice-and-Access, you can contact our
transfer agent, Computershare Trust Company of Canada, at 1-866-962-0498. Requests for paper copies should be made as soon as possible
but must be received no later than April 6, 2022, in order to allow sufficient time for Shareholders to receive and review the Meeting
materials and return the proxy form or voting instruction form prior to the proxy deadline. Beneficial Shareholders may request a paper
copy by going online at www.proxyvote.com or by calling toll-free at 1-877-907-7643 and entering the control number located on
the voting instruction form and following the instructions provided.
Shareholders who are unable to attend the Meeting
are requested to complete, date and sign the form of proxy (or voting instruction form, as applicable) and return it to Computershare
Trust Company of Canada, Proxy Department, 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1, so that it is received
no later than 11:00 a.m. (Calgary time) on April 26, 2022, or, if the Meeting is adjourned or postponed, no later than 48 hours (excluding
Saturdays, Sundays and holidays) before the time of the adjourned or postponed Meeting.
If you are a registered Shareholder and you (i)
do not wish to receive our Annual Report next year; or (ii) wish to receive interim reports, please fill out and return the Registered
Shareholder Form included in the Meeting materials. If you are a beneficial Shareholder and returned last year’s form requesting a copy
of our annual or interim reports, you received copies of one or all of the documents requested. You will be asked again this year whether
or not you wish to receive these documents for 2022. If you would like to receive these documents, please fill out and return the Beneficial
Shareholder Form included in the Meeting materials.
You will find additional information regarding
our business in our annual information form for the fiscal year ended December 31, 2021, and our financial information is provided in
our audited consolidated financial statements and accompanying management’s discussion and analysis for the fiscal year ended December
31, 2021. Copies of these documents along with our other public documents are available on our website at www.transalta.com, on
SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Our Board values open dialogue and welcomes advice
from our Shareholders. Our Board has adopted a Shareholder Engagement Policy that is intended to encourage and facilitate Shareholders
expressing their views on strategic, governance and other matters directly to the Board. Our Board also encourages Shareholder participation
at our annual Shareholder meetings. Further details about our Shareholder Engagement Policy and our Shareholder engagement practices
are discussed beginning on page 60 under “Governance – Shareholder Engagement”. At the Meeting, Registered Shareholders
and duly appointed proxyholders (including beneficial Shareholders who have duly appointed themselves as proxyholders) will be able to
ask questions of the Chair of the Board as well as our President and Chief Executive Officer (“CEO”). In between Shareholder
meetings, the Company supports an open and transparent process for Shareholders to contact the Board, including the chairs of the Board
committees, through the office of the Corporate Secretary or at the email listed below.
Shareholders may communicate directly with the
Board or any Board members by directing their correspondence to the Board by mail or by email as follows by marking it “Confidential
– Board-Shareholder Engagement”:
The Board, through the oversight of the Audit,
Finance and Risk Committee (“AFRC”), has established several options for employees, contractors, Shareholders, suppliers, and
other stakeholders to report any accounting irregularities, ethical violations or any other matters they wish to bring to the attention
of the Board. The AFRC may be contacted by:
A confidential, anonymous voicemail on TransAlta’s
Ethics Helpline at 1-855-374-3801 (US/Canada) and 1-800-40-5308 (Australia); or
Further details about our Whistleblower Policy
are discussed beginning on page 46 under “Governance – Our Ethical Commitment – Whistleblower Procedures”.
Registered Shareholders and duly appointed proxyholders
(including beneficial Shareholders who have duly appointed themselves as proxyholders) who attend the Meeting online will be able to
listen to the Meeting, ask questions and vote at the Meeting by completing a ballot that will be made available online during the Meeting,
all in real time, provided that they are connected to the Internet. Non-registered (beneficial) Shareholders who have not duly appointed
themselves as proxyholder will not be able to vote or communicate at the Meeting. This is because the Company and our transfer agent,
Computershare Trust Company of Canada (“Computershare”), do not have a record of the non-registered Shareholders, and, as
a result, have no knowledge of non-registered shareholdings or entitlements to vote unless non-registered Shareholders appoint themselves
as proxyholder.
If you are a registered Shareholder and wish
to appoint a third-party proxyholder to vote on your behalf at the Meeting, you must appoint such proxyholder by inserting their name
in the space provided on the form of proxy sent to you and follow all of the instructions therein, within the prescribed deadline. Registered
Shareholders wishing to appoint a third-party proxyholder (other than the TransAlta representative proxyholders indicated on the form
of proxy) must ALSO register their proxyholders at http://www.computershare.com/TransAlta (reference Client ID of ZTMQ).
If you are a non-registered Shareholder and wish
to vote at the Meeting, you must first appoint yourself as proxyholder by inserting your own name in the space provided on the voting
instruction form sent to you and follow all of the applicable instructions, within the prescribed deadline, provided by your intermediary
AND then register yourself as proxyholder at http://www.computershare.com/TransAlta (reference Client ID of ZTMQ). After you register,
Computershare will provide you with a Control Number via email. Please contact your intermediary as soon as possible to determine
what additional procedures must be followed to appoint yourself or a third party as your proxyholder (including whether to obtain a separate
valid legal form of proxy from your intermediary if you are located outside of Canada).
In all cases, all proxies must be received and
all proxyholders must be registered before 11:00 a.m. (Calgary time) on April 26, 2022, or, in the case of adjournment or postponement
of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time fixed for the adjourned or postponed
Meeting in order to participate and vote at the Meeting.
The Meeting will be held in a virtual-only format
and can be accessed by logging in online at https://web.lumiagm.com/425458825. We recommend that you log in at least one hour
before the Meeting begins.
The Meeting will be available through an HTML
client for mobile web and compatible with the latest versions of Chrome, Firefox, Edge and Safari. If you are having technical difficulties
in joining the Meeting or participating during the Meeting, there will be live chat or support on the Lumi Global meeting platform that
can assist with inquiries. It is also recommended that you obtain live event support by contacting our transfer agent and registrar,
Computershare Trust Company of Canada, at 1-800-564-6253. If you continue to experience issues after following the advice given, please
contact support@lumiglobal.com or “raise a ticket”. When you contact support at Lumi Global, please ensure
you have the following information available in order for Lumi Global to help you as quickly as possible: Event Name, Meeting ID, Username,
Control Number, Issue.
If you attend the Meeting online, it is important
that you remain connected to the Internet at all times during the Meeting in order to vote when balloting commences. It is your responsibility
to ensure connectivity for the duration of the Meeting. You should allow ample time to check into the Meeting online and complete the
related procedure. If you have questions regarding your ability to participate or vote at the Meeting, please contact Computershare at
1-800-564-6253.
If you do not wish to vote at the Meeting, please
refer to the Meeting materials (which are also accessible electronically) for information on how to vote by appointing a proxyholder,
submitting a proxy or, in the case of a non-registered Shareholder, through an intermediary. Voting by proxy is the easiest way to vote,
as it enables someone else to vote on your behalf. Voting in advance of the Meeting is available via the means described in your proxy
or voting instruction form and our Meeting materials.
Use the form of proxy (the “Proxy”)
to appoint a proxyholder. By appointing a proxyholder, you are giving someone else the authority to attend the Meeting and vote for you.
If you returned your signed Proxy and did not
appoint anyone to be your proxyholder, John P. Dielwart, Chair of the Board, and John H. Kousinioris, President and Chief Executive Officer
of TransAlta, have agreed to act as your proxyholder to vote or withhold from voting your shares at the Meeting in accordance with your
instructions.
Voting by Proxy
Use the Proxy to vote your shares. If you do
not plan to attend the Meeting, or have your proxyholder attend, you may vote as follows:
By Mail |
· |
complete,
date and sign the Proxy in accordance with the instructions included on the Proxy; and |
| · |
return
the completed Proxy in the envelope provided to Computershare Trust Company of Canada, Attention: Proxy Department, 8th Floor,
100 University Avenue, Toronto, Ontario M5J 2Y1. |
By Telephone |
· |
call
1-866-732-8683 from a touch-tone phone and follow the voice instructions; |
| · |
refer
to the Proxy sent to you for the 13-digit Control Number, located on the back in the lower left corner of the Proxy; and |
| · |
convey
your voting instructions by use of touch-tone selections over the telephone. |
By Internet |
· |
access
the website www.proxyvote.com and follow the instructions; |
| · |
refer to the Proxy sent
to you for the 13-digit Control Number, located on the back in the lower left corner of the Proxy; and |
| · |
convey your voting instructions
electronically over the Internet. |
| |
Please note that you cannot appoint anyone other
than the director and officer named on your Proxy as your proxyholder if you vote by telephone.
Please note that your Proxy and voting instructions
must be received before 11:00 a.m. (Calgary time) on April 26, 2022, or, in the case of any adjournment or postponement of the
Meeting, not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time fixed for the adjourned or postponed Meeting.
We reserve the right to accept late Proxies and to waive the proxy cut-off deadline, with or without notice, but we are under no obligation
to accept or reject any particular late Proxy.
Changing Your Vote
You can change a vote you made by Proxy provided
such change is received before 11:00 a.m. (Calgary time) on April 26, 2022, or, in the case of any adjournment or postponement
of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and holidays) before the time of the adjourned or postponed Meeting
by either:
| · | submitting
a new Proxy that is dated later than the Proxy previously submitted and mailing it to Computershare
Trust Company of Canada, Attention: Proxy Department, 8th Floor, 100 University
Avenue, Toronto, Ontario M5J 2Y1; |
| · | voting
again by telephone or the Internet; or |
| · | any
other means permitted by applicable law. |
You can revoke a vote you made by Proxy by:
| · | submitting
by mail a notice of revocation executed by you or by your attorney, or, if the Shareholder
is a corporation, under its corporate seal or by an officer or attorney thereof duly authorized,
to Computershare Trust Company of Canada, Attention: Proxy Department, 8th Floor,
100 University Avenue, Toronto, Ontario M5J 2Y1. Your notice of revocation must be received
before 11:00 a.m. (Calgary time) on April 26, 2022, or, in the case of any adjournment or
postponement of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and holidays)
prior to the time fixed for the adjourned or postponed Meeting. |
Asking Questions at the Meeting
Registered Shareholders and duly appointed proxyholders
(including beneficial Shareholders who have duly appointed themselves as proxyholders) who attend the Meeting online will be able to
ask questions at the Meeting. Questions or comments can be submitted in the text box (chat feature) of the webcast platform throughout
the Meeting. Written questions or comments submitted through the text box of the webcast platform will be read or summarized by a representative
of the Company, after which the Chair of the Meeting will respond or direct the question to the appropriate person to respond. If several
questions relate to the same or a very similar topic, we may choose to group such questions and indicate that similar questions were
received.
These procedures may vary from time to time depending
on logistics and with a view to following best governance practices. A representative of the Company will provide an overview of these
procedures before the Meeting is called to order.
| | TransAlta Corporation | 2022 Management Proxy Circular | 16 |
Additional Information for Beneficial Shareholders
You are a beneficial Shareholder (“Beneficial
Shareholder”) if your common shares are registered in the name of an intermediary and your certificate is held with a bank, trust
company, securities broker, trustee or other institution (each, an “Intermediary”). TransAlta common shares beneficially owned
by a Beneficial Shareholder are registered either: (i) in the name of an Intermediary that the Beneficial Shareholder deals with in respect
of the TransAlta common shares (Intermediaries include, among others, banks, trust companies, securities dealers or brokers and trustees
or administrators of self-administered RRSPs, RRIFs, RESPs and similar plans); or (ii) in the name of a clearing agency (such as CDS
Clearing and Depository Services Inc.) of which the Intermediary is a participant.
The Company has distributed copies of the Notice-and-Access
notification to the Intermediaries and clearing agencies for distribution to Beneficial Shareholders. The Company will pay for an Intermediary
to deliver the Notice-and-Access notification (and printed copies of the Meeting materials, if requested) to objecting Beneficial Shareholders.
If you are a Beneficial Shareholder, your package
includes a voting instruction form. Beneficial Shareholders should follow carefully the instructions provided in the voting instruction
form by using one of the described methods provided to vote their TransAlta common shares. The voting instruction form is similar to
a form of proxy; however, it can only instruct the registered Shareholder how to vote your shares.
As the Beneficial Shareholder, you may:
Option 1. Vote through your Intermediary
If you wish to vote through your Intermediary,
follow the instructions on the proxy or voting instruction form provided by your Intermediary. Your Intermediary is required to ask for
your voting instructions before the Meeting. Please contact your Intermediary if you did not receive a voting instruction form. Alternatively,
you may receive from your Intermediary a pre-authorized proxy indicating the number of common shares to be voted, which you should complete,
sign, date and return as directed on the proxy.
Option 2. Vote at the meeting or by proxy
We do not have access to the names or holdings
of our non-registered Shareholders. That means you can only vote your common shares at the Meeting if you have previously appointed yourself
as the proxyholder for your common shares. If you wish to vote at the Meeting, appoint yourself as your proxyholder by writing your own
name in the space provided on the proxy or voting instruction form provided by your Intermediary AND following the instructions under
“How to Vote — Voting at the Meeting” above to register yourself as proxyholder. Do not complete the voting section on
the proxy or voting instruction form as your vote will be taken at the Meeting and return the proxy or voting instruction form to your
Intermediary in the envelope provided. You may also appoint someone else as the proxyholder for your common shares by printing their
name in the space in the proxy or voting instruction form provided by your Intermediary, submitting it as directed on the form AND following
the instructions under “How to Vote — Voting at the Meeting” above to register that person as you proxyholder. Your vote,
or the vote of your proxyholder, will be taken and counted at the Meeting. Your proxyholder must vote your shares in accordance with
your instructions at the Meeting. Please ensure that the person you appoint is aware that they have been appointed and attends the Meeting.
If your proxyholder does not attend the Meeting, your shares will not be voted. The proxy or voting instruction form confers discretionary
authority upon the named proxyholder in respect of amendments to or variations of matters identified in the Notice of Meeting and any
other matters that may properly come before the Meeting or any adjournment or postponement thereof.
Please note that if you are a US Beneficial Shareholder
and you wish to attend the Meeting and vote your shares, you must follow the instructions on the back of your proxy or voting instruction
form to obtain a legal proxy. Once you have received your legal proxy, you will need to submit and deliver it to the Company or its registrar
and transfer agent, Computershare Trust Company of Canada, prior to the proxy deposit date in order to vote your shares.
Option 3. Vote by telephone or the Internet
If you wish to vote by telephone or the Internet,
follow the instructions for telephone or the Internet voting on the proxy or voting instruction form provided by your Intermediary. TransAlta
may use the Broadridge QuickVote™ service to assist Beneficial Shareholders with voting their common shares over the telephone.
| | TransAlta Corporation | 2022 Management Proxy Circular | 17 |
Deadline for Voting
Whether Beneficial Shareholders vote by mail,
telephone or the Internet, your proxy (or voting instruction form) must be received by our transfer agent, Computershare Trust Company
of Canada, or the Company or its agents, by no later than 11:00 a.m. (Calgary time) on April 26, 2022, or, in the case of any
adjournment or postponement of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and holidays) before the time fixed
for the adjourned or postponed Meeting. All required voting instructions must be submitted to your Intermediary sufficiently in advance
of this deadline to allow your Intermediary time to forward this information to our transfer agent, Computershare Trust Company of Canada,
or the Company or its agents, prior to the proxy voting deadline. The time limit for deposit of proxies may be waived or extended by
the Chair of the Meeting, without notice.
We reserve the right to accept late proxies and
to waive the Proxy cut-off deadline, with or without notice, but we are under no obligation to accept or reject any particular late proxy
(or voting instruction form).
Changing Your Vote
If you have voted through your Intermediary and
would like to change or revoke your vote, contact your Intermediary to discuss whether this is possible and what procedures you need
to follow. The change or revocation of voting instructions by a Beneficial Shareholder can take several days or longer to complete and,
accordingly, any such action should be completed well in advance of the deadline prescribed in the proxy or voting instruction form by
the Intermediary or its service company to ensure it is given effect in respect of the Meeting.
| | TransAlta Corporation | 2022 Management Proxy Circular | 18 |
Business of the Meeting
There are five items of business to be considered
at the Meeting:
1.
Election of Directors
TransAlta’s Articles of Amalgamation (the “Articles”)
allow the Company to have not less than three and not more than 19 directors. Our Board considers annually the number of directors required.
The Board has determined that between nine and 14 directors are currently required in order to provide for effective decision-making,
staffing of Board committees and to address succession planning requirements.
Nominees
Each of the director nominees has indicated their
willingness to serve as a director. Each of the proposed nominees, with the exception of John H. Kousinioris, President and Chief Executive
Officer, who is also “independent” within the meaning of National Instrument 58-101 — Disclosure of Corporate Governance
Practices.
If elected, each director will serve until the
next annual meeting of Shareholders or until their successor is elected or appointed. Our directors are elected annually, individually,
and by majority vote. Our majority voting policy is described under “— Our Policy on Majority Voting” below. We believe
our Board should reflect the right balance between those directors who have skills and experience necessary to ensure our business and
strategies can be executed upon and those who have the technical, industry, operating, financial, business and other competencies to
maximize effective decision-making. A skills and expertise matrix outlining the combined skills and experience of our director nominees
is included below under “Skills Matrix” on page 36 of this Proxy Circular. We also strive to maintain a diversity of experiences
and perspectives on our Board, having regard to our skills matrix and our Board and Workforce Diversity Policy. Our Board and Workforce
Diversity Policy is described under “Governance — Board Characteristics — Diversity” on page 54 of this Proxy Circular.
The directors being nominated for election at the Meeting in 2022
are:
| |
(i) |
Rona
H. Ambrose |
(vii) |
Thomas
M. O’Flynn |
|
| |
(ii) |
John
P. Dielwart |
(viii)
|
Beverlee
F. Park |
|
| |
(iii) |
Alan
J. Fohrer |
(ix) |
Bryan
D. Pinney |
|
| |
(iv) |
Laura
W. Folse |
(x) |
James
Reid |
|
| |
(v) |
Harry
A. Goldgut |
(xi) |
Sandra
R. Sharman |
|
| |
(vi) |
John
H. Kousinioris |
(xii) |
Sarah
A. Slusser |
|
| |
|
|
|
Vote
FOR the TransAlta director nominees on the Proxy today. The Board recommends a vote FOR all 12 director nominees. Unless
otherwise instructed, the persons designated in the Proxy intend to vote FOR each of the 12 director nominees listed above. |
The biographies of our nominees for election
to the Board are listed in the following section.
| | TransAlta Corporation | 2022 Management Proxy Circular | 19 |
Rona
H. Ambrose(1)
Age:
52
Alberta,
Canada
Director
Since: 2017
Independent
Top
Four Relevant Competencies:
| – | Technology
/ Telecommunications |
| – | Environment
/ Climate Change |
Deputy Chairwomen,
TD Securities. Ms. Ambrose is the Deputy Chairwoman of TD Securities. She was the former Leader of Canada’s Official Opposition in
the House of Commons and former leader of the Conservative Party of Canada. As a key member of the federal cabinet for a decade, she
solved problems as a minister of the Crown across nine government departments, including serving as Vice Chair of the Treasury Board
for several years and Chair of the cabinet committee for public safety, justice and Indigenous issues. As the former environment minister
responsible for the greenhouse gas (“GHG”) regulatory regime in place across several industrial sectors, she understands the
challenges facing the fossil fuel industry.
Ms. Ambrose was
personally responsible for the development of several federal policies, ranging from industrial strategies in military procurement to
health innovation to improvements to sexual assault laws. She is a passionate advocate for women in Canada and around the world and led
the global movement to create the “International Day of the Girl” at the United Nations. She was also responsible for ensuring
that Indigenous women in Canada were granted equal matrimonial rights. She successfully fought for the creation of a Canadian refugee
program to bring Yazidi women and girls who have been sexually enslaved by ISIS to safety in Canada.
She is a Global
Fellow at the Wilson Centre Canada Institute in Washington, DC, serves on the advisory board of the Canadian Global Affairs Institute
and is a director of Coril Holdings Ltd. and Andlauer Healthcare Group. She is also the Chair of the Women’s Council of Canada. She has
a Bachelor of Arts from the University of Victoria and a Master of Arts from the University of Alberta. She is also a graduate of the
Harvard Kennedy School of Government Senior Leaders Program.
Ms. Ambrose has
an extensive track record of strong leadership acquired through a wide range of experience at the most senior levels of the Canadian
government. Ms. Ambrose’s extensive public policy experience and demonstrated ability to bring people of divergent views together for
a common purpose adds strength to our Board and the Company. Accordingly, the Board recommends that Shareholders vote FOR Ms. Ambrose’s
re-election to the Board.
| Board/Committee
Membership | |
Attendance | |
Attendance
Total | | |
Value
of
Compensation
Received in 2021 | |
| Board of Directors | |
11 of 11 | |
| | | |
| | |
| Governance, Safety
and Sustainability Committee (Chair) | |
5 of 5 | |
| 100 | % | |
$ | 176,500 | |
| Human Resources Committee | |
7 of 7 | |
| | | |
| | |
Securities
held as at December 31 of respective year
| Year | |
Common
Shares | | |
Deferred
Share Units | | |
Total | | |
Market
Value(2) | | |
Share
Ownership
Requirement(3) |
| 2021 | |
| 8,897 | | |
| 51,603 | | |
| 60,500 | | |
$ | 827,640 | | |
|
| 2020 | |
| 8,897 | | |
| 44,389 | | |
| 53,286 | | |
$ | 489,165 | | |
Meets |
| 2019 | |
| 7,897 | | |
| 23,776 | | |
| 31,673 | | |
$ | 286,324 | | |
|
Other
Public Board Directorships and Committee Memberships
| Company | |
Committee |
| Andlauer
Healthcare Group | |
Audit;
Compensation, Nominating & Governance |
Public
Board Interlocks
None
Prior
Year’s Voting Results: Voting Results of 2021 Annual and Special Meeting of Shareholders
| Votes
For | | |
Percentage | | |
Votes
Withheld | | |
Percentage | |
| | 182,167,298 | | |
| 99.15 | % | |
| 1,559,128 | | |
| 0.85 | % |
| | TransAlta Corporation | 2022 Management Proxy Circular | 20 |
John
P. Dielwart(1)
Age:
69
Alberta,
Canada
Director
Since: 2014
Independent
Top
Four Relevant Competencies:
| – | Engineering
and Technical |
| – | Environment
/ Climate Change |
| – | M&A
/ Organizational Change |
Corporate Director.
Mr. Dielwart is the Chair of the Board. Mr. Dielwart was formerly CEO of ARC Resources Ltd. He oversaw the growth of ARC Resources
Ltd. from start-up in 1996 to a company with a total capitalization of approximately $10 billion at the time of his retirement. After
his retirement from ARC Resources Ltd. on January 1, 2013, Mr. Dielwart re-joined ARC Financial Corp. (“ARC Financial”) as
Vice-Chairman and Partner. ARC Financial is Canada’s leading energy-focused private equity manager. In 2020, Mr. Dielwart resigned from
the Board of ARC Financial but remained as Partner and member of ARC Financial’s Investment and Governance committees, and currently
represents ARC Financial on the board of Aspenleaf Energy Limited.
Mr. Dielwart has
a Bachelor of Science with distinction (civil engineering) from the University of Calgary. He is a member of the Association of Professional
Engineers and Geoscientists of Alberta and is a past-Chairman of the Board of Governors of the Canadian Association of Petroleum Producers.
In 2015, Mr. Dielwart was inducted into the Calgary Business Hall of Fame and in 2018 he received the Oil and Gas Council’s Canadian
Lifetime Achievement Award.
The Board believes
that Mr. Dielwart is a diligent, independent director who provides the Company with a wealth of experience in leadership, finance and
entrepreneurship along with a strong understanding of the commodity markets in which we operate, specifically the oil and gas markets.
Accordingly, the Board recommends that Shareholders vote FOR Mr. Dielwart’s re-election to the Board.
| Board/Committee
Membership | |
Attendance | |
Attendance
Total | | |
Value
of
Compensation
Received in 2021 | |
| Board of Directors
(Chair of the Board) | |
11 of 11 | |
| | | |
| | |
| Special
Committee(4) | |
6 of 6 | |
| 100 | % | |
$ | 333,000 | |
Securities
held as at December 31 of respective year
| Year | |
Common
Shares | | |
Deferred
Share Units | | |
Total | | |
Market
Value(2) | | |
Share
Ownership
Requirement(3) |
| 2021 | |
| 30,720 | | |
| 124,561 | | |
| 155,281 | | |
$ | 2,124,244 | | |
|
| 2020 | |
| 17,225 | | |
| 122,696 | | |
| 139,921 | | |
$ | 1,284,475 | | |
Meets |
| 2019 | |
| — | | |
| 120,210 | | |
| 120,210 | | |
$ | 1,086,698 | | |
|
Other
Public Board Directorships and Committee Memberships
| Company | |
Committee |
| Crescent Point Energy Corp. | |
Reserves; Environmental, Health
and Safety (Chair) |
Public
Board Interlocks
None
Prior
Year’s Voting Results: Voting Results of 2021 Annual and Special Meeting of Shareholders
| Votes
For | | |
Percentage | | |
Votes
Withheld | | |
Percentage | |
| | 183,271,407 | | |
| 99.77 | % | |
| 422,019 | | |
| 0.23 | % |
| | TransAlta Corporation | 2022 Management Proxy Circular | 21 |
Alan
J. Fohrer
Age:
71
California,
US
Director
Since: 2013
Independent
Top
Four Relevant Competencies:
| – | Accounting,
Finance and Tax |
| – | Engineering
and Technical |
| – | Electric
Energy / Utility |
| – | International
Operations |
Corporate Director.
Mr. Fohrer is the former Chairman and CEO of Southern California Edison Company (“SCE”), a subsidiary of Edison International
(“Edison”) one of the largest electric utilities in the US. He was elected CEO in 2002 and Chairman in 2007. In 2000, Mr. Fohrer
was elected as President and Chief Executive Officer of Edison Mission Energy (“EME”), a subsidiary of Edison that owns and
operates independent power facilities. During his tenure at EME, Mr. Fohrer restructured a number of international projects, which enhanced
the value of the assets sold in subsequent years. Mr. Fohrer also served as Executive Vice-President and CFO of both Edison and SCE from
1995 to 1999. After 37 years with Edison, Mr. Fohrer retired in December 2010.
Mr. Fohrer currently
sits on the board of PNM Resources, Inc., a publicly held energy holding company. He is also a member of the Viterbi School of Engineering
Board of Councilors for the University of Southern California and Chair of the California Science Center Foundation.
Mr. Fohrer has
served on boards of directors of the Institute of Nuclear Power Operations, the California Chamber of Commerce, Duratek, Inc., Osmose
Utilities Services, Inc., MWH, Inc., Blue Shield of California and Synagro, a private waste management company.
Mr. Fohrer holds
a Master of Science in civil engineering from the University of Southern California, Los Angeles, as well as a Master of Business Administration
from California State University in Los Angeles.
Mr. Fohrer brings
to the Company and the Board experience in accounting, finance and the power industry from both a regulated and deregulated market perspective.
Accordingly, the Board recommends that Shareholders vote FOR Mr. Fohrer’s re-election to the Board.
| Board/Committee
Membership | |
Attendance | |
Attendance
Total | | |
Value
of
Compensation
Received in 2021 | |
| Board of Directors | |
11 of 11 | |
| | | |
| | |
| Audit, Finance and
Risk Committee | |
8 of 8 | |
| 100 | % | |
$ | 204,168 | (5) |
| Governance, Safety and Sustainability
Committee | |
5 of 5 | |
| | | |
| | |
Securities
held as at December 31 of respective year
| Year | |
Common
Shares | | |
Deferred
Share Units | | |
Total | | |
Market
Value(2) | | |
Share
Ownership
Requirement(3) |
| 2021 | |
| 6,398 | | |
| 120,352 | | |
| 126,750 | | |
$ | 1,733,940 | | |
|
| 2020 | |
| 6,398 | | |
| 110,479 | | |
| 116,877 | | |
$ | 1,072,931 | | |
Meets |
| 2019 | |
| 6,398 | | |
| 95,053 | | |
| 101,451 | | |
$ | 917,117 | | |
|
Other
Public Board Directorships and Committee Memberships
| Company | |
Committee |
| PNM Resources, Inc. | |
Audit and Ethics (Chair); Nominating
& Governance |
Public
Board Interlocks
None
Prior
Year’s Voting Results: Voting Results of 2021 Annual and Special Meeting of Shareholders
| Votes
For | | |
Percentage | | |
Votes
Withheld | | |
Percentage | |
| | 183,128,587 | | |
| 99.67 | % | |
| 597,839 | | |
| 0.33 | % |
| | TransAlta Corporation | 2022 Management Proxy Circular | 22 |
Laura
W. Folse
Age:
63
Texas,
US
Director
Since: 2021
Independent
Top
Four Relevant Competencies:
| – | Electric
Energy / Utility |
| – | Engineering
and Technical |
Corporate Director.
Ms. Folse is the former CEO of BP Wind Energy North America Inc (“BP Wind Energy”). As CEO for BP Wind Energy she led a
business with over 500 employees and contractors and comprised of 14 wind farms across eight states with an operating capacity of over
2.5 gigawatts.
Prior to her role
as CEO of BP Wind Energy, she served at BP p.l.c. as Executive VP, Science, Technology, Environment and Regulatory Affairs, in which
she led the operational, scientific and technological programs within the multibillion dollar cleanup and restoration effort in response
to the 2010 BP Macondo well explosion off the coast of Louisiana. At its peak, the cleanup project team that she led consisted of over
45,000 people working across five US Gulf and Mexico states. She successfully negotiated with federal, state, and local government officials
to implement and conclude the offshore and onshore clean-up efforts. Prior thereto, she held numerous leadership roles with increasing
responsibility and complexity within BP p.l.c.
Ms. Folse has a
Master of Management in Business from Stanford University, a Master of Science in Geology from the University of Alabama and a Bachelor
of Science in Geology from Auburn University.
Ms. Folse is a
Board member for the Auburn University College of Arts & Sciences and was a Board member for the American Wind Energy Association
from 2016 to 2019.
Ms. Folse brings to the Company and
the Board experience in corporate risk management, large-scale crisis management, leveraging data analysis, leading large and complex
organizations, and driving cultural change while realizing improvements in safety, operational and financial performance. Accordingly,
the Board recommends that Shareholders vote FOR Ms. Folse’s re-election to the Board.
| Board/Committee
Membership (6) | |
Attendance | |
Attendance
Total | | |
Value
of
Compensation
Received in 2021 | |
| Board of Directors | |
9 of 9 | |
| | |
| |
| Governance, Safety
and Sustainability Committee | |
2 of 2 | |
| 100 | % | |
$ | 147,070 | (5) |
| Investment
Performance Committee (Chair) | |
7 of 7 | |
| | | |
| | |
Securities
held as at December 31 of respective year
| Year | |
Common
Shares | | |
Deferred
Share Units | | |
Total | | |
Market
Value(2) | | |
Share
Ownership
Requirement(3) |
| 2021 | |
| — | | |
| 5,215 | | |
| 5,215 | | |
$ | 71,341 | | |
On Track |
Other
Public Board Directorships and Committee Memberships
| Company | |
Committee |
| None | |
N/A |
Public
Board Interlocks
None
Prior
Year’s Voting Results: Voting Results of 2021 Annual and Special Meeting of Shareholders
| Votes
For | | |
Percentage | | |
Votes
Withheld | | |
Percentage | |
| | 183,225,650 | | |
| 99.73 | % | |
| 500,777 | | |
| 0.27 | % |
| | TransAlta Corporation | 2022 Management Proxy Circular | 23 |
Harry
A. Goldgut(1)
Age:
66
Ontario,
Canada
Director
Since: 2019
Independent
Top
Four Relevant Competencies:
| – | M&A
/ Organizational Change |
| – | Electric
Energy / Utility |
Vice Chair,
Brookfield Asset Management Inc. Mr. Goldgut is Vice Chair of Brookfield’s Renewable Power and Infrastructure Groups and provides
strategic advice related to Brookfield’s open-end Infrastructure Fund. Mr. Goldgut is also one of two Brookfield nominees to the Board
pursuant to the Investment Agreement (as defined below) between TransAlta and an affiliate of Brookfield discussed under “Governance
– Board Characteristics – Independence of Directors”.
Mr. Goldgut was
the CEO or Co-CEO and Chairman of Brookfield Renewable Power Inc., from 2000 to 2008, and thereafter, until 2015, he was Chairman of
Brookfield’s Power and Utilities Group. From 2015 to 2018, he served as Executive Chairman of Brookfield’s Infrastructure and Power Groups.
He joined Brookfield in 1997 and led the expansion of Brookfield’s renewable power and utilities operations. He has had primary responsibility
for strategic initiatives, acquisitions and senior regulatory relationships. He was responsible for the acquisition of the majority of
Brookfield’s renewable power assets. He also played a role in the restructuring of the electricity industry in Ontario as a member of
several governmental committees, including the Electricity Market Design Committee, the Minister of Energy’s Advisory Committee, the
Clean Energy Task Force, the Ontario Energy Board Chair’s Advisory Roundtable and the Ontario Independent Electricity Operator CEO Roundtable
on Market Renewal.
Mr. Goldgut also
serves on the Boards of Directors of Isagen S.A. ESP, the third-largest power generation company in Colombia, and the Princess Margaret
Cancer Foundation. Mr. Goldgut holds a Bachelor of Laws degree from Osgoode Hall Law School at York University.
Mr. Goldgut brings to the Company and
the Board extensive experience in regulatory and government affairs, as well as experience in acquiring and operating renewable energy
assets. Mr. Goldgut’s background in renewable energy provides important insight to the Board. Accordingly, the Board recommends that
Shareholders vote FOR Mr. Goldgut’s re-election to the Board.
| Board/Committee Membership(7) | |
Attendance | |
Attendance Total | | |
Value of
Compensation
Received in 2021 | |
| Board of Directors | |
8 of 8 | |
| | | |
| | |
| Investment Performance Committee | |
10 of 10 | |
| 100 | % | |
$ | 160,000 | (8) |
Securities
held as at December 31 of respective year
| Year | |
Common
Shares | | |
Deferred
Share Units | | |
Total | | |
Market
Value(2) | | |
Share
Ownership
Requirement(3) |
| 2021 | |
| 91,740 | (8) | |
| — | | |
| 91,740 | | |
$ | 1,255,003 | | |
|
| 2020 | |
| 65,579 | (8) | |
| — | | |
| 65,579 | | |
$ | 602,015 | | |
Meets(9) |
| 2019 | |
| 12,289 | (8) | |
| — | | |
| 12,289 | | |
$ | 111,097 | | |
|
Other
Public Board Directorships and Committee Memberships
| Company | |
Committee |
| None | |
N/A |
Public
Board Interlocks
None
Prior
Year’s Voting Results: Voting Results of 2021 Annual and Special Meeting of Shareholders
| Votes
For | | |
Percentage | | |
Votes
Withheld | | |
Percentage | |
| | 183,192,620 | | |
| 99.71 | % | |
| 533,807 | | |
| 0.29 | % |
| | TransAlta Corporation | 2022 Management Proxy Circular | 24 |
John
H. Kousinioris(1)(11)
Age:
57
Alberta,
Canada
Director
Since: 2021
Non-Independent
Top
Four Relevant Competencies:
| – | Electric
Energy / Utility |
| – | Environment
/ Climate Change |
| – | M&A
/ Organizational Change |
President and
CEO of the Company. John Kousinioris was appointed the President and Chief Executive Officer of the Company and joined the Board
on April 1, 2021. Prior to his appointment, Mr. Kousinioris served as COO for the Company. As COO, he was responsible for overseeing
operations, shared services, commercial, trading, customer solutions, hedging and optimization at the Company. Prior thereto, Mr. Kousinioris
was the Company’s Chief Growth Officer and Chief Legal and Compliance Officer. Mr. Kousinioris’ prior leadership roles have
provided him with responsibility for almost every aspect of the Company’s business. He was also the President of TransAlta Renewables
Inc. until February 5, 2021.
Prior to joining
TransAlta, Mr. Kousinioris was a partner and co-head of the corporate commercial department at Bennett Jones LLP. He has 30 years of
experience in securities law, mergers and acquisitions and corporate governance matters.
Mr. Kousinioris
has a Bachelor of Arts degree (Honours) in Business Administration from the University of Western Ontario, a Master of Business Administration
degree from York University and a Bachelor of Laws degree from Osgoode Hall Law School at York University. He has attended the Advanced
Management Program at Harvard University. He is also Vice Chair of the Board of Governors of Bow Valley College and a member of the Board
of Directors of the Calgary Stampede Foundation.
As President and CEO of the Company,
Mr. Kousinioris is responsible for the overall stewardship of the Company, including providing strategic leadership to the Company. Mr.
Kousinioris has demonstrated outstanding vision and leadership with an unwavering commitment to the Company’s long-term success.
Accordingly, the Board recommends that Shareholders vote FOR Mr. Kousinioris’ re-election to the Board.
| Board/Committee
Membership(10) | |
Attendance | |
Attendance
Total | | |
Value
of
Compensation
Received in 2021 | |
| Board of Directors | |
9 of 9 | |
| 100 | % | |
N/A | |
Securities
held as at December 31 of respective year
| Year | |
Common
Shares | | |
Share
Units | | |
Total | | |
Market
Value(2) | | |
Share
Ownership
Requirement(3) |
| 2021 | |
| 180,591 | (11) | |
| 139,316 | (12) | |
| 319,907 | | |
$ | 4,376,328 | | |
Meets(13) |
Other
Public Board Directorships and Committee Memberships
| Company | |
Committee |
| None | |
N/A |
Public
Board Interlocks
None
Prior
Year’s Voting Results: Voting Results of 2021 Annual and Special Meeting of Shareholders
| Votes
For | | |
Percentage | | |
Votes
Withheld | | |
Percentage | |
| | 183,255,261 | | |
| 99.74 | % | |
| 471,166 | | |
| 0.26 | % |
| | TransAlta Corporation | 2022 Management Proxy Circular | 25 |
Thomas
M. O’Flynn
Age:
62
New
Jersey, US
Director
Since: 2021
Independent
Top
Four Relevant Competencies:
| – | M&A
/ Organizational Change |
| – | Accounting,
Finance and Tax |
| – | Electric
Energy / Utility |
Corporate Director.
Mr. O’Flynn is currently CFO of Powin Energy, a battery energy storage company. Mr. O’Flynn is also a Venture Partner in Energy
Impact Partners, a private energy technology fund investing in high-growth companies in the energy, utility and transportation industries,
and also an investor in Powin. Mr. O’Flynn was the CEO and Chief Investment Officer, AES Infrastructure Advisors. Prior thereto
he was Executive Vice President and Chief Financial Officer at AES Corporation (“AES”) and responsible for all aspects of global
finance and M&A teams across six global regions. During his tenure, Mr. O’Flynn helped lead AES through a significant transformation,
including strategic exits of non-core markets, that resulted in improved financial stability and allowed for the redeployment of cash
to primary growth markets. AES’s total shareholder return increased 54% during his tenure and its credit rating improved significantly.
Mr. O’Flynn was also a key driver in initiating a major transition to renewables and green energy to significantly improve AES’s
growth profile and reduce its carbon footprint.
Prior to joining
AES, Mr. O’Flynn was with The Blackstone Group Inc. where he was Senior Advisor, Power and Utility Sector, and Chief Operating
Officer and Chief Financial Officer of Transmission Developers Inc., a Blackstone-controlled entity that develops innovative power transmission
projects in an environmentally responsible manner. Prior thereto he was Executive Vice President and Chief Financial Officer at Public
Service Enterprise Group Incorporated and was Head of North American Power at Morgan Stanley.
Mr. O’Flynn
has a Bachelor of Arts in Economics from Northwestern University and a Master of Business Administration in Finance from the University
of Chicago. He is also an adjunct professor at Northwestern University for a Master’s Program at the Institute for Sustainability
and Energy.
Mr. O’Flynn has demonstrated an
ability to realize shareholder value through his significant senior executive experience at large electricity companies. He has led successful
organizational transformations, including by focusing on acquisitions and greenfield development. Accordingly, the Board recommends that
Shareholders vote FOR Mr. O’Flynn’s re-election to the Board.
| Board/Committee
Membership (14) | |
Attendance | |
Attendance
Total | | |
Value
of
Compensation
Received in 2021 | |
| Board of Directors | |
9 of 9 | |
| | | |
| | |
| Special
Committee (4) | |
6 of 6 | |
| | | |
| | |
| Audit, Finance and
Risk Committee | |
6 of 6 | |
| 100 | % | |
$ | 134,627 | (5) |
| Investment Performance Committee | |
7 of 7 | |
| | | |
| | |
Securities
held as at December 31 of respective year
| Year | |
Common
Shares | | |
Share
Units | | |
Total | | |
Market
Value(2) | | |
Share
Ownership
Requirement(3) |
| 2021 | |
| 5,171 | | |
| 5,215 | | |
| 10,386 | | |
$ | 142,080 | | |
On
Track |
Other
Public Board Directorships and Committee Memberships
| Company | |
Committee |
| None | |
N/A |
Public
Board Interlocks
None
Prior
Year’s Voting Results: Voting Results of 2021 Annual and Special Meeting of Shareholders
| Votes
For | | |
Percentage | | |
Votes
Withheld | | |
Percentage | |
| | 183,241,641 | | |
| 99.74 | % | |
| 484,786 | | |
| 0.26 | % |
| | TransAlta Corporation | 2022 Management Proxy Circular | 26 |
Beverlee
F. Park(1)
Age:
60
British
Columbia, Canada
Director
Since: 2015
Independent
Top
Four Relevant Competencies:
| – | Accounting,
Finance and Tax |
| – | Environment
/ Climate Change |
| – | M&A
/ Organizational Change |
Corporate Director.
Ms. Park is the Chair of the Audit, Finance and Risk Committee of the Board. Ms. Park was previously a board member of SSR Mining
Inc., Teekay LNG Partners, InTransit BC and BC Transmission Corp, where she had chaired the audit committees. Ms. Park has served on
a wide range of not-for-profit boards over her career, including the University of British Columbia Board of Governors.
Ms. Park was an
executive of TimberWest Forest Corp until her retirement in 2013. While at TimberWest she held several roles including Interim CEO, COO,
President of the real estate division and Executive Vice President and CFO. Prior to being at TimberWest, Ms. Park was at BC Hydro and
KPMG.
Ms. Park holds
a Bachelor of Commerce from McGill University, a Masters in Business Administration from the Simon Fraser University Executive Program
and is a Fellow of the Chartered Professional Accountants of British Columbia (FCPA, FCA).
Ms. Park brings
to the Company 35 years of experience in a range of industries. Her extensive experience delivering shareholder value together with her
strong financial expertise has made her a valuable contributor to the Board. Accordingly, the Board recommends that Shareholders vote
FOR Ms. Park’s re-election to the Board.
| Board/Committee
Membership | |
Attendance | |
Attendance
Total | | |
Value
of
Compensation
Received in 2021 | |
| Board of Directors | |
11 of 11 | |
| | |
| |
| Special
Committee(4) | |
6 of 6 | |
| | |
| |
| Audit, Finance and
Risk Committee (Chair) | |
8 of 8 | |
| 100 | % | |
$ | 223,000 | |
| Human Resources Committee | |
7 of 7 | |
| | | |
| | |
Securities
held as at December 31 of respective year
| Year | |
Common
Shares | | |
Deferred
Share Units | | |
Total | | |
Market
Value(2) | | |
Share
Ownership
Requirement(3) |
| 2021 | |
| 18,739 | | |
| 98,816 | | |
| 117,555 | | |
$ | 1,608,152 | | |
|
| 2020 | |
| 18,739 | | |
| 90,885 | | |
| 109,624 | | |
$ | 1,006,348 | | |
Meets |
| 2019 | |
| 18,739 | | |
| 79,182 | | |
| 97,921 | | |
$ | 885,206 | | |
|
Other
Public Board Directorships and Committee Memberships
| Company | |
Committee |
| None | |
N/A |
Public
Board Interlocks
None
Prior
Year’s Voting Results: Voting Results of 2021 Annual and Special Meeting of Shareholders
| Votes
For | | |
Percentage | | |
Votes
Withheld | | |
Percentage | |
| | 182,286,776 | | |
| 99.22 | % | |
| 1,439,650 | | |
| 0.78 | % |
| | TransAlta Corporation | 2022 Management Proxy Circular | 27 |
Bryan
D. Pinney(1)
Age:
69
Alberta,
Canada
Director
Since: 2018
Independent
Top
Four Relevant Competencies:
| – | Accounting,
Finance and Tax |
| – | M&A
/ Organizational Change |
Corporate Director.
Mr. Pinney is currently the lead director for North American Construction Group Ltd. and a director of Sundial Growers Inc., a NASDAQ
listed company. He is also a director of one private company. Mr. Pinney was also the past chair of the Board of Governors of Mount Royal
University and has previously served on a number of non-profit boards.
Mr. Pinney has
over 30 years of experience serving many of Canada’s largest corporations, primarily in energy and resources and construction. Mr. Pinney
served as Calgary Managing Partner of Deloitte LLP from 2002 through 2007 and as National Managing Partner of Audit & Assurance from
2007 to 2011 and Vice-Chair until June 2015. Mr. Pinney was a past member of Deloitte LLP’s Board of Directors and chair of the Finance
and Audit Committee. He was a partner at Andersen LLP and served as Calgary Managing Partner from 1991 through May 2002.
He is a Fellow
of the Institute of Chartered Accountants, a Chartered Business Valuator and is a graduate of the Ivey Business School at the University
of Western Ontario with an honours degree in Business Administration. He is also a graduate of the Canadian Institute of Corporate Directors.
Mr. Pinney’s extensive
leadership accomplishments, financial expertise, knowledge of regulatory and compliance matters and diverse range of industry experience
make him an important contributor to the Board. Accordingly, the Board recommends that Shareholders vote FOR Mr. Pinney’s re-election
to the Board.
| Board/Committee
Membership | |
Attendance | |
Attendance
Total | | |
Value
of
Compensation
Received in 2021 | |
| Board of Directors | |
11 of 11 | |
| | |
| |
| Special
Committee(4) | |
6 of 6 | |
| | |
| |
| Audit, Finance and
Risk Committee | |
8 of 8 | |
| 100 | % | |
$ | 223,000 | |
| Human Resources Committee (Chair) | |
7 of 7 | |
| | | |
| | |
Securities
held as at December 31 of respective year
| Year | |
Common
Shares | | |
Deferred
Share Units | | |
Total | | |
Market
Value(2) | | |
Share
Ownership
Requirement(3) |
| 2021 | |
| 20,427 | | |
| 69,633 | | |
| 90,060 | | |
$ | 1,232,021 | | |
|
| 2020 | |
| 20,427 | | |
| 55,689 | | |
| 76,116 | | |
$ | 689,745 | | |
Meets |
| 2019 | |
| 20,427 | | |
| 34,855 | | |
| 55,282 | | |
$ | 499,749 | | |
|
Other
Public Board Directorships and Committee Memberships
| Company | |
Committee |
| North American Construction
Group Ltd. | |
Audit (Chair); Human Resources
& Compensation |
| Sundial Growers Inc. | |
Audit (Chair); Human Resources
& Compensation; Nominating and Corporate Governance |
Public
Board Interlocks
None
Prior
Year’s Voting Results: Voting Results of 2021 Annual and Special Meeting of Shareholders
| Votes
For | | |
Percentage | | |
Votes
Withheld | | |
Percentage | |
| | 179,721,863 | | |
| 97.82 | % | |
| 4,004,563 | | |
| 2.18 | % |
| | TransAlta Corporation | 2022 Management Proxy Circular | 28 |
James
Reid(1)
Age:
56
Alberta,
Canada
Director
Since: 2021
Independent
Top
Four Relevant Competencies:
| – | Accounting,
Finance and Tax |
| – | International
Operations |
| – | M&A
/ Organizational Change |
Corporate Director.
Mr. Reid is a former Managing Partner of Brookfield Asset Management Inc., where he led Brookfield’s Private Equity Group located
in Calgary, Alberta. In that role he was responsible for originating, evaluating and structuring investments and financings in the energy
sector and overseeing operations in Brookfield private equity energy segment. He established Brookfield’s Calgary office in 2003
after spending several years as a Chief Financial Officer for two oil and gas exploration and production companies in Western Canada.
Mr. Reid is also
one of two Brookfield nominees to the Board pursuant to the Investment Agreement (as defined below) between TransAlta and an affiliate
of Brookfield discussed under “Governance — Board Characteristics — Independence of Directors” below.
Mr. Reid obtained
his Chartered Accountant designation at PricewaterhouseCoopers in Toronto and holds a Bachelor of Arts in commerce from the University
of Toronto.
Mr. Reid brings
to the Company and the Board considerable experience in leadership, finance, mergers and acquisitions and organizational change. His
wealth of knowledge in the energy sector and his role with Brookfield, our long-term Shareholder, make him an important addition to the
Board. Accordingly, the Board recommends that Shareholders vote FOR Mr. Reid’s re-election to the Board.
| Board/Committee
Membership(7) | |
Attendance | |
Attendance
Total | | |
Value
of
Compensation
Received in 2021 | |
| Board of Directors | |
6 of 6 | |
| | | |
| | |
| Investment Performance
Committee | |
7 of 7 | |
| 100 | % | |
$ | 105,275 | (8) |
Securities
held as at December 31 of respective year
| Year | |
Common
Shares | | |
Deferred
Share Units | | |
Total | | |
Market
Value(2) | | |
Share
Ownership
Requirement |
| 2021 | |
| 91,740 | (8) | |
| — | | |
| 91,740 | | |
$ | 1,255,003 | | |
Meets(9) |
Other
Public Board Directorships and Committee Memberships
| Company | |
Committee |
| CWC Energy Services Corp. | |
Board Chair |
| Inter Pipeline Ltd. | |
Director |
Public
Board Interlocks
None
Prior
Year’s Voting Results: Voting Results of 2021 Annual and Special Meeting of Shareholders
| Votes
For | | |
Percentage | | |
Votes
Withheld | | |
Percentage | |
| | 183,204,466 | | |
| 99.72 | % | |
| 521,960 | | |
| 0.28 | % |
| | TransAlta Corporation | 2022 Management Proxy Circular | 29 |
Sandra
R. Sharman(1)
Age:
59
Ontario,
Canada
Director
Since: 2020
Independent(15)
Top
Four Relevant Competencies:
| – | M&A
/ Organizational Change |
Senior Executive
Vice-President and Group Head, People, Culture and Brand, Canadian Imperial Bank of Commerce (“CIBC”). Ms. Sharman leads
the Human Resources, Communications, Marketing and Enterprise Real Estate teams at CIBC, supporting execution of business strategy, transforming
to a purpose-driven bank and enabling a world-class culture.
Ms. Sharman and
her team are responsible for developing and delivering the Global Human Capital Strategy designed to challenge conventional thinking,
drive business solutions and shape the culture of the bank. Her key areas of accountabilities also include workplace transformation,
compensation and benefits, employee relations, policy and governance, talent management, marketing, corporate real estate, including
the bank’s new global headquarters, CIBC Square and all aspects of internal and external communications and public affairs, including
government relations and awards.
A proven business
leader with over 30 years of human resources and financial services experience in both Canada and the US. Ms. Sharman has played a lead
role in shaping an inclusive and collaborative culture at CIBC, focused on empowering and enabling employees to reach their full potential.
Ms. Sharman assumed
the leadership of Human Resources at CIBC in 2014 and added accountability for communications and public affairs in 2017. Since then,
her portfolio has expanded to encompass purpose, brand, marketing and, most recently, corporate real estate. Ms. Sharman earned her Master
of Business Administration from Dalhousie University.
Ms. Sharman’s
executive experience and leadership accomplishments within an international and complex business make her an important addition to the
Board. Accordingly, the Board recommends that Shareholders vote FOR Ms. Sharman’s re-election to the Board.
| Board/Committee
Membership | |
Attendance | |
Attendance
Total | | |
Value
of
Compensation
Received in 2021 | |
| Board of Directors | |
11 of 11 | |
| | |
| |
| Governance, Safety
and Sustainability Committee | |
5 of 5 | |
| 100 | % | |
$ | 161,500 | |
| Human Resources Committee | |
7 of 7 | |
| | | |
| | |
Securities
held as at December 31 of respective year
| Year | |
Common
Shares | | |
Deferred
Share Units | | |
Total | | |
Market
Value(2) | | |
Share
Ownership
Requirement(3) |
| 2021 | |
| — | | |
| 26,441 | | |
| 26,441 | | |
$ | 361,713 | | |
|
| 2020 | |
| — | | |
| 13,144 | | |
| 13,144 | | |
$ | 120,662 | | |
On Track |
Other
Public Board Directorships and Committee Memberships
| Company | |
Committee |
| None | |
N/A |
Public
Board Interlocks
None
Prior
Year’s Voting Results: Voting Results of 2021 Annual and Special Meeting of Shareholders
| Votes
For | | |
Percentage | | |
Votes
Withheld | | |
Percentage | |
| | 182,045,392 | | |
| 99.09 | % | |
| 1,681,035 | | |
| 0.91 | % |
| | TransAlta Corporation | 2022 Management Proxy Circular | 30 |
Sarah
A. Slusser
Age:
59
Washington,
US
Director
Since: 2021
Independent
Top
Four Relevant
| – | Electric
Energy / Utilities |
| – | International
Operations |
| – | M&A
/ Organizational Change |
| – | Environment
/ Climate Change |
Chief Executive
Officer, Cypress Creek Renewables, LLC. Ms. Slusser is the CEO of Cypress Creek Renewables, LLC (“Cypress Creek”), a
solar and storage independent power producer that develops, owns and operates projects in the US Cypress Creek owns a 1,600 MW operating
fleet and has a 7,000 MW development pipeline. She joined Cypress Creek Renewables, LLC as CEO in 2019 to reposition the company for
sustainable growth. Prior to joining Cypress Creek, she founded Point Reyes Energy Partners LLC, a solar and energy storage advisory
and development company, where she provided strategic advice to a number of large companies in the renewable sector. She remains a founding
partner of Point Reyes Energy Partners LLC. Prior to this, she co-founded GeoGlobal Energy LLC, a geothermal company in the US, Chile,
and Germany, which was sold to its cornerstone investor in 2015.
Before co-founding
GeoGlobal Energy LLC, Ms. Slusser worked at AES for 21 years, where she earned increasingly significant leadership roles. She ultimately
became a Senior Vice President and Managing Director reporting directly to the CEO and led the corporate Mergers and Acquisitions group
for AES. She was President of one of eight divisions of AES that was responsible for all development, construction and operations in
the Caribbean, Mexico, and Central America.
Ms. Slusser holds
a Bachelor of Arts (cum laude) in geology from Harvard University and a Master of Business Administration from the Yale School of Management.
She is a member of the Board of Directors of the Redwood Foundation, a family foundation promoting education and the environment and
Our Food Chain, a non-profit promoting healthy eating.
Ms. Slusser’s
broad range of experience in the electricity sector at innovative, competitive renewable and traditional electricity companies will provide
the Board with significant capital allocation and mergers and acquisitions expertise and makes her a valuable addition to the Board.
Accordingly, the Board recommends that Shareholders vote FOR Ms. Slusser’s re-election to the Board.
| Board/Committee
Membership | |
Attendance | |
Attendance
Total | | |
Value
of
Compensation
Received in 2021 | |
| Board of Directors | |
9 of 9 | |
| | |
| |
| Special
Committee (4) | |
6 of 6 | |
| | |
| |
| Human
Resources Committee(16) | |
3 of 4 | |
| 96.2 | % | |
$ | 132,730 | (5) |
| Investment
Performance Committee(16) | |
7 of 7 | |
| | | |
| | |
Securities
held as at December 31 of respective year
| Year | |
Common
Shares | | |
Share
Units | | |
Total | | |
Market
Value(2) | | |
Share
Ownership
Requirement(3) |
| 2021 | |
| — | | |
| 5,215 | | |
| 5,215 | | |
$ | 71,341 | | |
On Track |
Other
Public Board Directorships and Committee Memberships
| Company | |
Committee |
| None | |
N/A |
Public
Board Interlocks
None
Prior
Year’s Voting Results: Voting Results of 2021 Annual and Special Meeting of Shareholders
| Votes
For | | |
Percentage | | |
Votes
Withheld | | |
Percentage | |
| | 183,152,906 | | |
| 99.69 | % | |
| 573,521 | | |
| 0.31 | % |
| | TransAlta Corporation | 2022 Management Proxy Circular | 31 |
Notes:
| (2) | The 2019 market value is based
on the weighted average closing share price of our common shares on the TSX for the 20 trading
days prior to and including December 31, 2019, of $9.04, the 2020 market value is based on
the weighted average closing share price of our common shares on the TSX for the 20 trading
days prior to and including December 31, 2020, of $9.17, and the 2021 market value is based
on the weighted average closing share price of our common shares on the TSX for the 20 trading
days prior to and including December 31, 2021, of $13.68. The 20-day weighted average closing
price is prescribed in our Director Share Ownership Requirements as the price to be used
for determining if share ownership requirements have been met. |
| (3) | As of December 31, 2021, the five-year
minimum shareholding requirement for independent directors is three times the annual retainer
for directors ($480,000) and the Chair of the Board ($990,000), which new directors are required
to satisfy within prescribed periods of joining the Board. For directors that receive their
compensation in US dollars, this share ownership requirement is also in US dollars. See “Compensation
— Report on Director Compensation – Share Ownership Requirements of Directors”. |
| (4) | The Special Committee was established
for the purposes of evaluating a potential transaction. See “Governance — The
Board’s Mandate — Strategic Planning” below. |
| (5) | The compensation payable to Mr.
Fohrer, Ms. Folse, Mr. O’Flynn and Ms. Slusser is converted to US dollars using the exchange
rate on the 13th day of the last month of each compensation quarter. The amounts
appearing in this table are in Canadian dollars and reflect the actual amounts paid using
the exchange rate on the 13th day of the last month of each compensation quarter. |
| (6) | Ms. Folse was appointed a member
of the Board on May 4, 2021. Ms. Folse joined the Governance, Safety and Sustainability Committee
on May 4, 2021. Ms. Folse was appointed Chair of the Investment Performance Committee on
May 4, 2021. |
| (7) | Mr. Goldgut and Mr. Reid are nominees
of Brookfield (as defined below) in accordance with the Investment Agreement (as defined
below). They are both independent within the meaning of National Instrument 58-101 —
Disclosure of Corporate Governance Practices; however, they do not meet the additional
independence requirements prescribed for audit committee members under National Instrument
52-110 — Audit Committees as a result of an affiliate of Brookfield receiving
an annual management fee of $1,500,000 for having representatives serve on the hydro operating
committee. See “Governance — Board Characteristics — Independence of Directors”
below. Neither Mr. Goldgut nor Mr. Reid serve on the AFRC. |
| (8) | Mr. Goldgut and Mr. Reid have
each elected to receive common shares for 100% of their director compensation and have directed
the Company to register such common shares to an entity affiliated with Brookfield. To the
extent Mr. Goldgut or Mr. Reid are deemed to be the beneficial owner of any such shares,
Mr. Goldgut and Mr. Reid expressly disclaim beneficial ownership thereof. In total, 91,740
common shares were registered to an affiliate of Brookfield as of December 31, 2021, pursuant
to the directions of Brookfield nominee directors. |
| (9) | Mr. Goldgut and Mr. Reid are exempt
from directly satisfying the share ownership requirement for so long as they are Brookfield
nominees on the Board and for so long as Brookfield is in compliance with its obligations
under the Investment Agreement. |
| (10) | Mr. Kousinioris joined the Board
on April 1, 2021. Mr. Kousinioris has been the President and CEO of TransAlta since April
1, 2021. |
| (11) | As at December 31, 2021, Mr.
Kousinioris also owned 2,540 common shares of TransAlta Renewables Inc., a public company
subsidiary of the Company. |
| (12) | Mr. Kousinioris’ share
units are comprised of eligible shares for purposes of the executive share ownership policy,
which consists of common shares, Restricted Share Units (“RSU”) and Officer Deferred
Share Units (“ODSU”) (as described under “Compensation Discussion and Analysis
— Incentive Plan Awards”). As at December 31, 2021, he held 139,316
RSUs and no ODSUs. In addition, Mr. Kousinioris holds Performance Share Units and
options exercisable to acquire common shares. See “Compensation Discussion and Analysis
— Incentive Plan Awards”. |
| (13) | Mr. Kousinioris is subject to
the requirements of the executive share ownership policy, requiring that he own and hold
five times his base salary as of April 1, 2021. See “Compensation Discussion and Analysis
— NEO Share Ownership”. |
| (14) | Mr. O’Flynn was appointed a member
of the Board, the Audit Finance and Risk Committee and the Investment Performance Committee
on May 4, 2021. |
| (15) | Ms. Sharman is independent within
the meaning of National Instrument 58-101 — Disclosure of Corporate Governance Practices;
however, she does not meet the additional independence requirements prescribed for audit
committee members under National Instrument 52-110 — Audit Committees as a result
of CIBC receiving fees from the Company in the ordinary course of business in connection
with the provision by CIBC of banking and financial services to the Company. See “Governance
– Board Characteristics — Independence of Directors” below. |
| (16) | Ms. Slusser was appointed a member
of the Board on May 4, 2021. Ms. Slusser joined the Human Resources Committee and the Investment
Performance Committee on May 4, 2021. |
| The
Board believes that the appointment of each of the 12 nominees to the Board is in the best interests of the Company and unanimously
recommends a vote FOR each of the director nominees. Vote FOR the TransAlta director nominees on the Proxy today. Unless
otherwise instructed, the persons designated in the Proxy intend to vote FOR the election of each of these nominees as directors. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 32 |
Our Policy on Majority Voting
The Company’s majority voting policy, which is
contained in the General Governance Guidelines for the Board, provides that in an uncontested election of directors at an annual meeting
of Shareholders, the votes cast in favour of the election of a director nominee must represent a majority of the total votes cast at
the Meeting. If that is not the case, that director must immediately tender their resignation for consideration by the balance of the
Board. Absent extenuating circumstances, it is expected that the Board will accept the resignation in a time frame consistent with the
interests of the Company and, in any event, within 90 days from the date of the relevant Shareholders’ meeting. The Board will promptly
disclose its decision, including the full reasons, if the Board determines not to accept a resignation in a press release and will also
inform the TSX. See Appendix “B” to this Proxy Circular for further details regarding our policy on majority voting.
Board Committees and Membership as at December 31, 2021
| | |
Committees |
| | |
Audit, Finance and Risk (“AFRC”) | |
Governance, Safety
and Sustainability
(“GSSC”) | |
Human Resources
(“HRC”) | |
Investment
Performance (“IPC”) |
| Independent Directors | |
| |
| |
|
|
|
| Rona H. Ambrose | |
| |
Chair | |
ü |
|
|
| John P. Dielwart(1) | |
| |
| |
|
|
|
| Alan J. Fohrer | |
ü | |
ü | |
|
|
|
| Laura W. Folse | |
| |
ü | |
| |
Chair |
| Harry A. Goldgut | |
| |
| |
| |
ü |
| Thomas M. O’Flynn | |
ü | |
| |
| |
ü |
| Beverlee F. Park △ | |
Chair | |
| |
ü |
|
|
| Bryan D. Pinney △ | |
ü | |
| |
Chair |
|
|
| James Reid | |
| |
| |
| |
ü |
| Sandra R. Sharman | |
| |
ü | |
ü |
|
|
| Sarah A. Slusser | |
| |
| |
ü | |
ü |
| Management Director – Not Independent | |
| |
| |
|
|
|
| John H. Kousinioris(2) | |
| |
| |
|
|
|
ü
— Member
△ — Designated Audit
Committee Financial Expert
Notes:
| (1) | Mr. Dielwart is the Chair of the
Board and attends committee meetings but is not a member of any committee. |
| (2) | Mr. Kousinioris has been the President
and CEO of TransAlta since April 1, 2021, and as such is not a member of any committee. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 33 |
Director Meeting Attendance in 2021
Directors are expected to attend all regularly
scheduled and special meetings of the Board and its committees. Aggregate attendance for our directors in 2021 is 98.3%. The attendance
on an individual director basis is set out in the following table and under each director’s personal biography in “Business of the
Meeting — Election of Directors — Nominees”.
| | | |
Board Meetings | |
Committee Meetings | | |
Total Attendance | |
| Name | | |
Regular | |
Special(1) | |
AFRC | |
GSSC | |
HRC | |
IPC | | |
# | |
% | |
| Ambrose | | |
11 of 11 | |
- | |
- | |
5 of 5 | |
7 of 7 | |
- | | |
23 of 23 | |
100.0 | % |
| Dielwart(2) | | |
11 of 11 | |
6 of 6 | |
- | |
- | |
- | |
- | | |
17 of 17 | |
100.0 | % |
| Farrell(3) | | |
2 of 2 | |
- | |
- | |
- | |
- | |
- | | |
2 of 2 | |
100.0 | % |
| Fohrer | | |
11 of 11 | |
- | |
8 of 8 | |
5 of 5 | |
- | |
- | | |
24 of 24 | |
100.0 | % |
| Folse(4) | | |
9 of 9 | |
- | |
- | |
2 of 2 | |
- | |
7 of 7 | | |
18 of 18 | |
100.0 | % |
| Goldgut (5) | | |
8 of 8 | |
- | |
- | |
- | |
- | |
10 of 10 | | |
18 of 18 | |
100.0 | % |
| Kousinioris(6) | | |
9 of 9 | |
- | |
- | |
- | |
- | |
- | | |
9 of 9 | |
100.0 | % |
| Legault(7) | | |
3 of 3 | |
- | |
- | |
- | |
- | |
3 of 3 | | |
6 of 6 | |
100.0 | % |
| Mansour(8) | | |
2 of 3 | |
- | |
- | |
3 of 3 | |
- | |
3 of 3 | | |
8 of 9 | |
88.9 | % |
| Nelson(9) | | |
2 of 3 | |
- | |
1 of 2 | |
- | |
- | |
2 of 3 | | |
5 of 8 | |
62.5 | % |
| O’Flynn(10) | | |
9 of 9 | |
6 of 6 | |
6 of 6 | |
- | |
- | |
7 of 7 | | |
28 of 28 | |
100.0 | % |
| Park | | |
11 of 11 | |
6 of 6 | |
8 of 8 | |
- | |
7 of 7 | |
- | | |
32 of 32 | |
100.0 | % |
| Pinney | | |
11 of 11 | |
6 of 6 | |
8 of 8 | |
- | |
7 of 7 | |
- | | |
32 of 32 | |
100.0 | % |
| Reid(5)(11) | | |
6 of 6 | |
- | |
- | |
- | |
- | |
7 of 7 | | |
13 of 13 | |
100.0 | % |
| Sharman | | |
11 of 11 | |
- | |
- | |
5 of 5 | |
7 of 7 | |
- | | |
23 of 23 | |
100.0 | % |
| Slusser(12) | | |
9 of 9 | |
6 of 6 | |
- | |
- | |
3 of 4 | |
7 of 7 | | |
25 of 26 | |
96.2 | % |
| Total | | |
125 of 127 | |
30 of 30 | |
31 of 32 | |
20 of 20 | |
31 of 32 | |
46 of 47 | | |
283 of 288 | |
98.3 | % |
Notes:
| (1) | Special Committee meetings are
scheduled on an ad hoc basis. |
| (2) | Mr. Dielwart is not a member of
any standing committee of the Board; however, he attends the meetings of each committee. |
| (3) | Ms. Farrell retired as a member
of the Board, President and CEO of TransAlta effective March 31, 2021. Ms. Farrell was not
a member of any standing committee of the Board; however, she attended meetings of the standing
committees (excluding the in camera portion of the meeting consisting exclusively
of independent directors). As Ms. Farrell was not a member of any committees, her attendance
was not recorded. |
| (4) | Ms. Folse was elected as a director
on May 4, 2021. She was appointed a member and Chair of the GSSC and a member of the IPC
on May 4, 2021. |
| (5) | Mr. Goldgut and Mr. Reid did not
attend three meetings of the Board due to the subject matter discussed at the meetings. |
| (6) | Mr. Kousinioris was appointed
President and CEO of TransAlta on April 1, 2021, and joined the Board of TransAlta on April
1, 2021. Mr. Kousinioris is not a member of any standing committee of the Board; however,
he attends committee meetings (excluding the in camera portion of the meeting consisting
exclusively of independent directors). As Mr. Kousinioris is not a member of any committees,
his attendance is not recorded. |
| (7) | Mr. Legault ceased to be a member
of the Board and the IPC on May 4, 2021. |
| (8) | Mr. Mansour ceased to be a member
of the Board, the GSSC and Chair and a member of the IPC on May 4, 2021. |
| (9) | Ms. Nelson ceased to be a member
of the Board, the AFRC and the IPC on May 4, 2021. |
| (10) | Mr. O’Flynn was elected as a
director on May 4, 2021. He was appointed a member of the AFRC and the IPC on May 4, 2021. |
| (11) | Mr. Reid was elected as a director
on May 4, 2021. He was appointed a member of the IPC on May 4, 2021. |
| (12) | Ms. Slusser was elected as a
director on May 4, 2021. She was appointed a member of the HRC and the IPC on May 4, 2021. |
Interlocking Directorships
The Board does not have any interlocking directorships.
A board interlock occurs when two or more of TransAlta’s directors also serve together as directors of another public company. The Board
has not adopted specific guidelines limiting the number of board interlocks that can exist at any time. However, pursuant to the General
Governance Guidelines for the Board (see Appendix “B”), when considering potential qualified candidates for nomination to
the Board, and in annually evaluating each director’s independence on the Board and individual contributions and performance, any board
interlocks are taken into account to ensure they do not undermine the independence or effectiveness of our directors. We also have no
interlocking relationships between HRC members and our President and Chief Executive Officer.
| | TransAlta Corporation | 2022 Management Proxy Circular | 34 |
Board Tenure
| The
average tenure for our director nominees is less than five years. |
|
| |
| |
In order to support the continued renewal of
skills, expertise and personal attributes, the Board undertakes a robust annual Board, Committee and individual director evaluation process.
The Board reviews annually the size and composition of the Board and each of its Committees and addresses the succession planning needs
associated with ensuring the Board has the necessary diversity of skills and experience. The Board undertakes to ensure that the appropriate
degree of experience and institutional knowledge is balanced with the regular introduction of fresh perspectives from new directors.
| The
Company has adopted a director retirement policy with an age limit of 75. |
|
| |
| |
The Company’s longest tenured director
nominee has been on the Board since 2013, and the average tenure for the director nominees is only 3.6 years. The Board has considered
adopting term limits but believes that term limits are arbitrary mechanisms for removing directors and can lead to the loss of valuable
skills necessary for effective decision-making as experienced directors could be forced to leave the Board solely because of length of
service. Instead, we believe that directors should be assessed according to their ability to make a meaningful contribution to the Board,
based on robust annual assessment processes.
Under TransAlta’s retirement policy, set out
in the General Governance Guidelines for the Board (see Appendix “B”), the Board has fixed a retirement age for directors
at age 75, provided that the Board may, in its discretion, extend the term of a director beyond the age of 75 if the Board determines
that the Company and the Board would benefit from the contributions, skills and experience of the director.
Although the Company’s retirement policies
should promote Board refreshment, the Company believes that the principal mechanism to ensure a strong and effective Board is through
a robust annual evaluation process that assesses each director’s ability to continue to make a meaningful contribution to the Board.
The GSSC annually reviews the size and composition of the Board and addresses succession planning needs associated with ensuring the
Board has the necessary diversity of skills and experience, balanced with the need to maintain continuity of experience and knowledge
on the Board.
Corporate Cease Trade Orders and Bankruptcies
Except as noted below, no director nominee is,
as at the date of this Proxy Circular, or has been, within the past 10 years before the date hereof, a director or executive officer
of any other issuer that, while that person was acting in that capacity: (i) was the subject of a cease trade or similar order or an
order that denied the relevant company access to any exemption under applicable securities legislation for a period of more than 30 consecutive
days; or (ii) was subject to an event that resulted, after the person ceased to be a director or executive officer, in the company being
the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under applicable securities
legislation for a period of more than 30 consecutive days; or (iii) while that director nominee was acting in their capacity as a director
or executive officer of that issuer, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal
under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise
with creditors or had a receiver, receiver manager or trustee appointed to hold its assets. No director nominee has, within the past
10 years before the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or been
subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed
to hold the assets of the director nominee. No director nominee has been subject to: (i) any penalties or sanctions imposed by a court
relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities
regulatory authority; or (ii) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered
important to a reasonable securityholder in deciding whether to vote for the director nominee.
Mr. Reid is a director of Second Wave Petroleum
Inc. (“SWP”), a private oil and gas exploration and production company. On June 30, 2017, SWP made an assignment into bankruptcy
pursuant to the Bankruptcy and Insolvency Act (Canada) (“BIA”). On September 7, 2017, SWP made a proposal under the
BIA and on October 5, 2017, the proposal was approved by the Court of Queen’s Bench of Alberta and the bankruptcy was annulled.
Mr. Dielwart was Chairman of the Board of Denbury
Resources Inc. (“Denbury”) which filed for bankruptcy protection in the US on July 29, 2020, under a prepackaged reorganization
plan with its bondholders. Denbury emerged from Chapter 11 on September 18, 2020, at which time the board was reconstituted and Mr. Dielwart
ceased being a director.
| | TransAlta Corporation | 2022 Management Proxy Circular | 35 |
Skills Matrix
We maintain a skills matrix where each director
indicates whether they have expertise and professional background in areas we consider to be essential for TransAlta, having regard to
our strategies, plans, operations and stakeholders. The skills matrix is also used by the Board as part of its succession planning process,
when identifying, selecting and nominating directors for appointment to the Board, and as part of evaluating the necessary skills, experiences
and qualifications needed in order to maximize effective decision-making by the Board and its Committees. Given the breadth of experience
and skills of each director, the table below lists only the top four competencies possessed by each director nominee based on the Board’s
assessment and each director’s self-evaluation. The Board believes the director nominees possess a diversity of skills and the
appropriate mix of competencies needed for the Board to effectively carry out its mandate and oversee the execution of the Company’s
strategies.
| | |
Ambrose | |
Dielwart | |
Fohrer | |
Folse | |
Goldgut | |
Kousinioris | |
O’Flynn | |
Park | |
Pinney | |
Reid | |
Sharman | |
Slusser | |
Totals |
|
| Gender(1) | |
F | |
M | |
M | |
F | |
M | |
M | |
M | |
F | |
M | |
M | |
F | |
F | |
|
|
| Location (Province/Country) | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
|
| British
Columbia | |
| |
| |
| |
| |
| |
| |
| |
• | |
| |
| |
| |
| |
1 |
|
| Alberta | |
• | |
• | |
| |
| |
| |
• | |
| |
| |
• | |
• | |
| |
| |
5 |
|
| Ontario | |
| |
| |
| |
| |
• | |
| |
| |
| |
| |
| |
• | |
| |
2 |
|
| US | |
| |
| |
• | |
• | |
| |
| |
• | |
| |
| |
| |
| |
• | |
4 |
|
| Years on Board | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
|
| 0 to 5 | |
• | |
| |
| |
• | |
• | |
• | |
• | |
| |
• | |
• | |
• | |
• | |
9 |
|
| 6 to 10 | |
| |
• | |
• | |
| |
| |
| |
| |
• | |
| |
| |
| |
| |
3 |
|
| 11+ | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
0 |
|
| Age | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
|
| 59 and under | |
• | |
| |
| |
| |
| |
• | |
| |
| |
| |
• | |
• | |
• | |
5 |
|
| 60 to 69 | |
| |
• | |
| |
• | |
• | |
| |
• | |
• | |
• | |
| |
| |
| |
6 |
|
| 70+ | |
| |
| |
• | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
1 |
|
| Top
Four Relevant Competencies(2) | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
|
| Accounting,
Finance and Tax | |
| |
| |
• | |
| |
| |
| |
• | |
• | |
• | |
• | |
| |
| |
5 |
|
| Engineering
and Technical | |
| |
• | |
• | |
• | |
| |
| |
| |
| |
| |
| |
| |
| |
3 |
|
| Government
Affairs | |
• | |
| |
| |
| |
• | |
| |
| |
| |
| |
| |
| |
| |
2 |
|
| Legal and
Regulatory | |
• | |
• | |
| |
| |
• | |
• | |
| |
| |
| |
| |
• | |
| |
5 |
|
| HR / Compensation | |
| |
| |
| |
• | |
| |
| |
| |
• | |
• | |
| |
• | |
| |
4 |
|
| Risk Management | |
| |
| |
| |
• | |
| |
| |
• | |
| |
• | |
• | |
• | |
| |
5 |
|
| Electric
Energy / Utility | |
| |
| |
• | |
• | |
• | |
• | |
• | |
| |
| |
| |
| |
• | |
6 |
|
| Technology
/ Telecommunications | |
• | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
1 |
|
| International
Operations | |
| |
| |
• | |
| |
| |
| |
| |
| |
| |
• | |
| |
• | |
3 |
|
| Environment
/ Climate Change | |
• | |
• | |
| |
| |
| |
• | |
| |
• | |
| |
| |
| |
• | |
5 |
|
| M&A /
Organizational Change | |
| |
• | |
| |
| |
• | |
• | |
• | |
• | |
• | |
• | |
• | |
• | |
9 |
|
Notes:
| (1) | Although for the purposes of this table gender has been identified
as male or female, the Company encourages directors, officers and employees to self-identify
their preferred gender identity, including non-binary identities. |
| (2) | Definitions for the top relevant
competencies are provided below: |
| • | Accounting, Finance and Tax — The understanding of financial
accounting and reporting, and corporate finance, as well as familiarity with internal financial/accounting controls and IFRS. |
| • | Engineering and Technical — The knowledge of engineering
principles and application of technical skills and expertise. |
| • | Government Affairs — The understanding of government,
diplomacy and public policy, internationally, federally or provincially. |
| • | Legal and Regulatory — The understanding of legal principles
and the workings of regulatory systems. |
| • | HR / Compensation — The understanding of executive compensation,
talent management/retention and succession planning. |
| • | Risk Management — The understanding of internal risk controls,
risk assessments and reporting. |
| • | Electric Energy / Utility — The knowledge of electric,
utility and renewables operations, including the driving of continuous improvements and best-in-class operational standards. |
| • | Technology / Telecommunications — The knowledge of relevant
emerging technologies, including information and telecom technology, and knowledge of telecommunications or content, including strategic
context, market competitors and business issues facing those industries. |
| • | International Operations — The knowledge of major international
operations and global strategy development. |
| • | Environment / Climate Change — The knowledge of corporate
responsibility practices and the constituents involved in sustainable development practices, including as it pertains to climate change. |
| • | M&A / Organizational Change — Competency in leading
major organizational change and/or managing a significant merger or acquisition. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 36 |
In addition to the top four competencies of each
director detailed above, all director nominees are required to have the following attributes:
| • | Strategic Oversight — The ability to support the
business and affairs of the Company through strategic stewardship and oversight, including by assisting with the establishment of key
policies and standards for the Company (including policies for the assessment and management of its risks) and through the review and
approval of the strategic plans of the Company. |
| • | Expertise — Extensive professional experience with
significant executive leadership accomplishments in business, government or the non-profit sector relevant to the Company’s business
and industry, financial position and risk profile. |
| • | Ability to Influence — Well-developed listening,
communicating and influencing skills to be able to actively participate in Board discussions and debate. |
| • | Integrity — Personal qualities of integrity and
credibility. |
| • | Commitment — The ability
to devote the time, effort and energy necessary to serve effectively as a director of the
Company. |
The table below describes the experience and
professional background of each director nominee. This table is intended to emphasize how each director nominee acquired the top four
competencies listed above.
| Leadership
Experience | |
Ambrose | |
Dielwart | |
Fohrer | |
Folse | |
Goldgut | |
Kousinioris | |
O’Flynn | |
Park | |
Pinney | |
Reid | |
Sharman | |
Slusser | |
Totals | |
| Chief Executive
Officer of a large, multi-national and complex organization | |
| |
• | |
• | |
• | |
• | |
• | |
• | |
| |
| |
| |
| |
• | |
7 | |
| Chief Financial
Officer or senior executive of a large, multinational and complex organization | |
| |
• | |
• | |
• | |
| |
• | |
• | |
• | |
• | |
• | |
• | |
• | |
10 | |
| Entrepreneur
or business owner of a successful organization | |
| |
• | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
• | |
2 | |
| Professional
advisor (e.g., lawyer or accountant) | |
| |
| |
| |
| |
• | |
• | |
• | |
| |
• | |
• | |
| |
| |
5 | |
| Senior government
official | |
• | |
| |
| |
| |
• | |
| |
| |
| |
| |
| |
| |
| |
2 | |
The GSSC may also consider other factors
that it determines to be relevant in the context of individual nominees, the Board as a whole and its committees, including the
benefits of promoting diversity (including gender diversity), as discussed under “Governance — Board Characteristics
— Diversity” on page 54.
2. Financial Statements
We have published the Company’s 2021 audited
consolidated financial statements, including the related auditors’ report and the related management’s discussion and analysis, for the
fiscal year ended December 31, 2021. The full text of the Annual Report, audited consolidated annual financial statements and management’s
discussion and analysis in either English or French are available on our website at https://transalta.com/investor-centre/reports-and-filings/,
under our profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
3. Reappointment of Auditors
At the Meeting, you will be asked to reappoint
Ernst & Young LLP as our auditors to hold office until the next annual meeting of Shareholders at remuneration to be fixed by the
Board. Representatives of Ernst & Young LLP will be available at the Meeting to answer any questions you may have. Ernst & Young
LLP has been our external auditors since 1947.
| | TransAlta Corporation | 2022 Management Proxy Circular | 37 |
Fees Paid to Ernst & Young LLP
For the years ended December 31, 2021, and December
31, 2020, Ernst & Young LLP and its affiliates were paid $3,724,342 and $4,253,798 respectively, as detailed below:
| Year Ended December 31 | |
2021 | | |
2020 | |
| Audit fees(1) | |
$ | 2,453,917 | | |
$ | 2,273,888 | |
| Audit-related fees(1)(2) | |
| 1,270,425 | | |
| 1,122,771 | |
| Tax fees | |
| - | | |
| 857,139 | |
| All other fees | |
| - | | |
| - | |
| Total | |
$ | 3,724,342 | | |
$ | 4,253,798 | |
Notes:
| (1) | Comparative figures have been reclassified to conform to the current
period classification of fees. |
| (2) | Included in the audit-related fee are 2021 — $844,167 (2020 —
$722,733) of fees billed to TransAlta Renewables Inc. |
No other audit firms provided external audit
services in 2021 or 2020.
The nature of each category of fees is described
below.
Audit Fees
Audit fees are for professional services rendered
for the audit and review of our financial statements or services provided in connection with statutory and regulatory filings and providing
comfort letters associated with securities documents.
Audit-Related Fees
Audit-related fees are for assurance and related
services that are reasonably related to the performance of the audit or review of our financial statements but that are not included
in the Audit Fees. Audit-related fees include statutory audits, pension audits and other compliance audits. In 2021 and 2020, we have
included the fees billed to TransAlta Renewables Inc., a controlled and consolidated subsidiary of TransAlta.
Tax Fees
Tax fees are tax-related services for the review
of tax returns, assistance with questions on tax audits, and tax planning.
All Other Fees
All other fees include products and services
provided by the Company’s auditor other than those services reported under Audit Fees, Audit-Related Fees and Tax Fees. This includes
fees related to training services provided by the auditor.
Pre-Approval Policies and Procedures
The AFRC has considered whether the provision
of services other than audit services is compatible with maintaining the auditors’ independence. The AFRC has adopted a policy that prohibits
TransAlta from engaging the auditors for “prohibited” categories of non-audit services and requires pre-approval of the AFRC
for other permissible categories of non-audit services, such categories being determined under the Sarbanes-Oxley Act (“Sarbanes-Oxley”).
This policy also provides that the Chair of the AFRC may approve permissible non-audit services during the quarter and report such approval
to the AFRC at its next regularly scheduled meeting.
| The
Board believes that the reappointment of Ernst & Young LLP as auditors of the Company and authorizing the Board to fix the auditor’s
remuneration is in the best interests of the Company and unanimously recommends a vote FOR this resolution. Unless otherwise
instructed, the persons designated in the Proxy intend to vote FOR the reappointment of Ernst & Young LLP as auditors
of the Company and to authorize the Board to fix the auditor’s remuneration. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 38 |
4. Advisory Vote on Executive
Compensation
At the meeting, you will be asked to consider
and approve, on a non-binding and advisory basis, a resolution on our approach to executive compensation as disclosed in this Proxy Circular.
A detailed discussion of our approach to executive compensation follows in our Compensation Discussion and Analysis (“CD&A”)
section beginning on page 81, which also includes a discussion on our compensation strategy, the objectives of different elements of
our compensation programs, the way performance is assessed and compensation decisions are made, and how our compensation policies and
practices are designed to align pay with performance and our Company’s strategies. Over the past few years, the HRC and the Board have
carefully considered and continue to enhance our approach to executive compensation, to ensure alignment with Company performance, our
strategic goals and the principles of pay-for-performance. We continue to make enhancements to our approach to executive compensation
consistent with those principles, the details of which are set out in the Letter to Shareholders and CD&A beginning on page 74 of
the Proxy Circular. In 2021, we received 97.25% support from shareholders for our approach to executive compensation.
As our Shareholder, on a non-binding and advisory
basis, you can vote “For” or “Against” our approach to executive compensation by considering and, if deemed advisable,
approving the following resolution:
“BE IT RESOLVED THAT, on a non-binding
and advisory basis, and not to diminish the role and responsibilities of the Board of Directors, the Shareholders accept the approach
to executive compensation disclosed in the Company’s Management Proxy Circular dated March 18, 2022, delivered in connection with the
2022 annual and special meeting of Shareholders of the Company.”
Since your vote is advisory, it will not be binding
on the Board. However, the Board and, in particular, the HRC will consider the outcome of the vote as part of their ongoing review of
executive compensation. The Company plans to hold an advisory vote on our approach to executive compensation on an annual basis.
| The
Board unanimously recommends a vote FOR our approach to executive compensation. Unless otherwise instructed, the persons designated
in the Proxy intend to vote FOR the approval of the advisory resolution on executive compensation. |
5. Renewal of Shareholder
Rights Plan
TransAlta is party to a shareholder rights plan
agreement, initially implemented on October 13, 1992, and last renewed at the Company’s annual and special Shareholders meeting
held on April 26, 2019, as amended and restated (the “Rights Plan”). The Rights Plan will expire as of the close of the Meeting
unless Shareholders vote at the Meeting to continue its operation. At a meeting on February 23, 2022, the Board approved, subject to
the approval of Shareholders, the continuation of the Rights Plan between the Company and Computershare Trust Company of Canada, as successor
to AST Trust Company (Canada) (formerly CST Trust Company), as Rights Agent, with amendments to clarify certain provisions and to reflect
current market practice for “new generation” rights plans, as well as amendments of a house-keeping nature (the “Amended
and Restated Rights Plan”). If the Shareholders approve the Rights Plan Resolution (as defined below), the Amended and Restated
Rights Plan will continue in effect for an additional three years.
The Board believes that the Amended and Restated
Rights Plan preserves the fair treatment of Shareholders, is consistent with current “new generation” rights plans and Canadian
corporate governance practices and addresses institutional investor guidelines. The Amended and Restated Rights Plan is not intended
to prevent a take-over of the Company. The Amended and Restated Rights Plan is not being adopted in respect of any specific proposal
to acquire control of the Company, nor is the Board currently aware of any pending or threatened take-over bid for the Company.
The full text of the Amended and Restated Rights
Plan, together with a blackline showing all changes made as compared to the existing Rights Plan, is available on our website at www.transalta.com
and under our profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. In the event of any
conflict between the provisions thereof and this summary, the provisions of the Amended and Restated Rights Plan on SEDAR will govern.
Capitalized terms used in this section “Renewal of Shareholder Rights Plan” but not otherwise defined have the meaning given
to those terms in the Amended and Restated Rights Plan.
In proposing the adoption of the Amended and
Restated Rights Plan, the Board considered the existing legislative framework governing take-over bids in Canada. On May 9, 2016, the
Canadian Securities Administrators adopted amendments to Canada’s take-over bid regime (referred to as the “Amended Take-over Bid
Rules”), which came into force in the form of National Instrument 62-104 —Take-over Bids and Issuer Bids (“NI
62-104”).
| | TransAlta Corporation | 2022 Management Proxy Circular | 39 |
Before the Amended Take-over Bid Rules came into
force, one of the main purposes of a rights plan was to give shareholders and the target board of directors more time to consider and
respond to an unsolicited take-over bid than what was provided for under Canadian securities laws (60 days under a typical rights plan
compared with 35 days under the then-existing securities laws). The Amended Take-over Bid Rules have addressed this concern with respect
to timing. However, there continues to be a role for rights plans in protecting issuers and preventing the unequal treatment of Shareholders,
principally due to the fact that the Amended Take-over Bid Rules do not apply to exempt take-over bids. Specifically, the Board continues
to believe that a rights plan is necessary to protect Shareholders from certain actions that could result in unequal treatment of Shareholders
under Canadian securities laws, including the following:
| a. | requiring the bid to be made to all Shareholders and protecting
against so-called “creeping bids”, being the accumulation of more than 20% of TransAlta’s Shares other than by way
of a formal take-over bid, such as (i) purchases from a small group of Shareholders under private agreements at a limited premium to
the market price not available to all Shareholders, (ii) the accumulation of TransAlta’s Shares over a stock exchange that could
effectively block a take-over bid made to all Shareholders, (iii) acquiring control through the slow accumulation of shares over a stock
exchange and without paying a control premium, or (iv) acquiring control through the purchase of TransAlta’s Shares in transactions
outside of Canada that may not be subject to the Canadian take- over bid rules; and |
| b. | protecting against the use of so-called “hard” lock-up
agreements by bidders, whereby existing Shareholders commit to tender their shares to a bidder’s take-over bid and such commitment
is either irrevocable or revocable but subject to preclusive termination conditions; such agreements could have the effect of deterring
other potential bidders bringing forward competing bids particularly where the number of locked-up shares would make it difficult or
unlikely for a competing bidder to achieve the 50% minimum tender requirement imposed by the Amended Take-over Bid Rules. |
The Amended and Restated Rights Plan is designed
to ensure that all Shareholders receive equal treatment by applying to all acquisitions of 20% or more of the Company’s outstanding
“Voting Shares” (being the Company’s outstanding common shares and any other shares of the Company entitled to vote
generally in the election of directors), except in limited circumstances including in Permitted Bids and Competing Permitted Bids (each
discussed further below). In addition, the Amended and Restated Rights Plan requires bidders to structure lock-up agreements so as to
provide locked-up Shareholders with reasonable flexibility to terminate such agreements in order to deposit their shares to a higher-value
bid or support another transaction offering greater value.
The Amended and Restated Rights Plan is therefore
designed to encourage a potential acquiror who intends to make a take-over bid to proceed either by way of a Permitted Bid, which requires
a take-over bid to meet certain minimum standards designed to promote the fair and equal treatment of all Shareholders, or with the concurrence
of the Board. If a take-over bid fails to meet these minimum standards and the Amended and Restated Rights Plan is not waived by the
Board, the Rights issued to Shareholders under the Amended and Restated Rights Plan will entitle the holders thereof, other than the
acquiror and certain related parties, to purchase additional shares at a significant discount to market, thus exposing the person acquiring
20% or more of the shares to substantial dilution of its holdings.
Based on these considerations, the Board has
determined that it is advisable and in the best interests of the Company to continue the operation of the Rights Plan, substantially
in the form and on the terms of the Amended and Restated Rights Plan, subject to Shareholders approving the Amended and Restated Rights
Plan at the Meeting. In recommending the approval of the Amended and Restated Rights Plan, it is not the intention of the Board to preclude
a bid for control of the Company or to secure the continuance of the directors or management of the Company. The Amended and Restated
Rights Plan allows Shareholders to tender their shares to a take-over bid as long as it meets the criteria for a Permitted Bid or Competing
Permitted Bid, as the case may be. The Amended and Restated Rights Plan is consistent with the Amended Take-over Bid Rules, as well as
current market practices for “new generation” rights plans. The Amended and Restated Rights Plan also takes into account
and addresses the guidelines of institutional investors and proxy advisory firms with respect to shareholder rights plans. The TSX has
conditionally accepted notice of filing of the Amended and Restated Rights Plan subject to, among other things, it being ratified and
approved by the Shareholders at the Meeting. If Shareholders do not ratify, confirm and approve the Amended and Restated Rights Plan
at the Meeting, then the existing Rights Plan will automatically terminate and Shareholders will not have the protection of any shareholder
rights plan.
The Amended and Restated Rights Plan contains
many of the same terms and conditions as the Rights Plan, with amendments made to clarify certain provisions, to reflect current market
practice or that are of a house-keeping nature.
| | TransAlta Corporation | 2022 Management Proxy Circular | 40 |
Summary of Principal Terms of Amended and Restated Rights Plan
The following is a summary of the Amended and
Restated Rights Plan and is qualified in its entirety by reference to the full text of the Amended and Restated Rights Plan, which is
available on our website at www.transalta.com and under our profile on SEDAR at www.sedar.com and on EDGAR
at www.sec.gov. In addition, a paper copy can be obtained by contacting in writing the Corporate Secretary, TransAlta Corporation,
Box 1900, Station “M”, 110 - 12th Avenue S.W., Calgary, Alberta, T2P 2M1; by telephone at 1 (800) 387-3598 in Canada or the
US, or (403) 267-7110 in Calgary and outside of North America; by fax at (403) 267-2559; or by email at corporate_secretary@transalta.com.
Effective Date
The effective date of the Amended and Restated
Rights Plan remains December 31, 1992 (the “Effective Date”). If approved by the Shareholders at the Meeting, the Amended
and Restated Rights Plan will be entered into by the Company and the Rights Agent with effect immediately following approval by the Shareholders
on the date of the Meeting, scheduled for April 28, 2022.
Term
The existing Rights Plan will automatically expire
and terminate at the close of the Meeting unless Shareholders vote at the Meeting to continue its operation in the form of the Amended
and Restated Rights Plan. If the Amended and Restated Rights Plan is not ratified and approved by a resolution passed by a majority of
the votes cast by the Independent Shareholders (as discussed below) present in person, or represented by proxy, at the Meeting, then
Shareholders will not have the protection of any shareholder rights plan. If the Amended and Restated Rights Plan is so ratified and
approved, then the Amended and Restated Rights Plan must be reconfirmed by the requisite majority of Independent Shareholders represented
in person or by proxy at every third annual meeting of the holders of TransAlta’s common shares (for the purposes of this section
“- Summary of Principal Terms of Amended and Restated Plan” only, the “Common Shares”) following the Meeting.
The Amended and Restated Rights Plan and the Rights will terminate at the close of business on the date of such third annual meeting
if the Amended and Restated Rights Plan is not so reconfirmed or presented for reconfirmation at such meeting, unless terminated earlier
in accordance with the terms of the Amended and Restated Rights Plan (in either such case, the “Expiration Time”), provided
that termination will not occur if a Flip-in Event has occurred, and has not been waived, prior to the date that the Amended and Restated
Rights Plan would otherwise have terminated.
Issue and Exercise of Rights
One right (a “Right”) was issued
and attached to each Common Share outstanding at 12:01 a.m. (Calgary time) (the “Record Time”) on the Effective Date and
automatically attaches to each Common Share issued after the Record Time but prior to the earlier of the Separation Time and the Expiration
Time.
The Rights are not exercisable prior to the Separation
Time. After the Separation Time, each Right entitles the registered holder thereof to purchase from the Company one Common Share at an
exercise price equal to three (3) times the Market Price of a Common Share determined as at the Separation Time, subject to adjustment
and certain anti-dilution provisions (the “Exercise Price”). If a Flip-in Event occurs (as described below), each Right will
be adjusted and, except as described under “Flip-in Event” below, will entitle the registered holder to receive from the
Company, upon payment of the Exercise Price, Common Shares having an aggregate Market Price on the date of the Flip-in Event equal to
twice the Exercise Price.
The issue of the Rights is not initially dilutive.
Upon a Flip-in Event occurring and the Rights separating from the Common Shares, reported earnings per share on a fully-diluted or non-diluted
basis may be affected. Holders of Rights not exercising their Rights upon the occurrence of a Flip-in Event may suffer substantial dilution.
Rights Certificates and Transferability
Before the Separation Time, the Rights are evidenced
by the certificates for the Common Shares (or by the book entry form registration for the associated Common Shares if issued in book
entry form) and are transferable only together with, and will be transferred by a transfer of, the associated Common Shares and are not
transferable separate from such shares. At the Separation Time, the Rights will separate from the associated Common Shares and, from
and after such time, the Rights will be evidenced by separate Rights Certificates (or separate book entry registration) which will be
transferable and trade separately from the shares.
| | TransAlta Corporation | 2022 Management Proxy Circular | 41 |
Separation Time
The “Separation Time” is the close
of business on the 10th trading day after the earliest to occur of: (i) the “Stock Acquisition Date”, which is the first
date of public announcement of facts indicating that a person has become an Acquiring Person, (ii) the date of the commencement of, or
first public announcement of the intent of any person (other than the Company or a subsidiary thereof) to make a take-over bid (other
than a Permitted Bid or a Competing Permitted Bid), and (iii) the date on which a Permitted Bid or Competing Permitted Bid fails to qualify
as such. In any case, the Separation Time can be such later date determined by the Board. For purposes of the Amended and Restated Rights
Plan, a “take-over bid” is an offer to acquire Voting Shares and/or Convertible Securities where the securities subject to
the offer, together with the securities Beneficially Owned by the person making the take-over bid (the “Offeror”), constitute
20% or more of the Company’s outstanding Voting Shares.
Acquiring Person
In general, an “Acquiring Person”
is a person who is the Beneficial Owner of 20% or more of the outstanding Voting Shares. Excluded from the definition of “Acquiring
Person” are the Company and its subsidiaries and, generally, any person who becomes a Beneficial Owner of 20% or more of the outstanding
Voting Shares as a result of one or more, or any combination of, (i) a Voting Share Reduction, (ii) Permitted Bid Acquisitions, (iii)
an Exempt Acquisition, (iv) Pro Rata Acquisitions, or (v) Convertible Security Acquisitions.
Also excluded from the definition of “Acquiring
Person” are (i) underwriters or members of banking or selling groups acting in connection with a distribution of securities by
way of a prospectus or private placement, and (ii) any person (a “Grandfathered Person”) who was the Beneficial Owner of
20% or more of the outstanding Voting Shares determined as at the Record Time, unless such Grandfathered Person becomes, after the Record
Time, the Beneficial Owner of additional Voting Shares that increases its Beneficial Ownership of Voting Shares by more than 1% of the
number of Voting Shares outstanding as at the Record Time, subject to certain exceptions.
Beneficial Ownership
In general, a person is a “Beneficial Owner”
if such person or its affiliates or associates or any other person acting jointly or in concert: (i) owns directly or indirectly the
securities at law or equity; and (ii) has the right to acquire (immediately or within 60 days) the securities upon the exercise of any
Convertible Securities or pursuant to an agreement, arrangement or understanding (other than a customary underwriting agreement or pledges
of securities).
However, in general, a person is not a Beneficial
Owner under the Amended and Restated Rights Plan where: (i) the securities have been, or have been agreed to be pursuant to a Lock-up
Agreement, deposited or tendered pursuant to a take-over bid made by the person, its affiliates, associates or joint actors, unless those
securities have been taken up or paid for; (ii) such person (including a fund manager, trust company or pension fund administrator) is
engaged in the management of investment funds for others and, generally, as long as that person: (A) holds those securities in the ordinary
course of its business for the account of others; and (B is not making a take-over bid or acting jointly or in concert with a person
who is making a take-over bid; or (iii) such person is a registered holder of securities as a result of carrying on the business of or
acting as a nominee of a securities depository.
Permitted Lock-up Agreements
Consistent with “new generation”
rights plans, under the Amended and Restated Rights Plan a bidder or other person will not be deemed to Beneficially Own a security because
it has entered into a Lock-up Agreement with holders of Voting Shares and/or Convertible Securities.
Generally, a “Lock-Up Agreement”
is an agreement between a person and a holder of Voting Shares and/or Convertible Securities (the terms of which are publicly disclosed
and a copy of which is made available to the public within the time frames set forth in the definition of Lock-up Agreement), pursuant
to which the holder (a “Locked-up Person”) agrees to deposit or tender Voting Shares and/or Convertible Securities to a take-over
bid (the “Lock-up Bid”) made or to be made by such person or any of its affiliates, associates or joint actors, and which
permits the Locked-up Person to withdraw its Voting Shares and/or Convertible Securities in order to deposit or tender them to another
take-over bid or support another transaction, provided that (i) the agreement permits the Locked-up Person to terminate its obligation
to deposit securities to the Lock-up Bid in order to tender its securities to another take-over bid or to support another transaction
having a greater value of consideration or consideration per security that exceeds the bid by a Specified Amount, and (ii) the agreement
permits the Locked-up Person to terminate its obligation to deposit securities to the Lock-up Bid in order to tender its securities to
another take-over bid or to support another transaction if the number of securities offered to be purchased under the competing bid or
transaction is greater than the number of securities under the Lock-up Bid or is at least a specified percentage greater than those under
the Lock-up Bid and the price per security under the competing offer is equal to or greater than the Lock-up Bid price.
The Lock-Up Agreement must not provide for break-up
fees or similar payments payable if the Locked-up Person fails to deposit its securities to the Lock-up Bid in order to accept or support
a competing transaction, which exceed the greater of (i) 2.5% of the price or value of the consideration payable under the Lock-up Bid
to the Locked-up Person and (ii) one-half of the increased value that is offered under the competing offer.
| | TransAlta Corporation | 2022 Management Proxy Circular | 42 |
A Lock-Up Agreement may contain a right of first
refusal or require a period of delay to give the bidder an opportunity to match the price, value or number in a competing take-over bid
or transaction (or other similar limitation on a shareholder’s right to withdraw its securities from the agreement), so long as
the limitation does not preclude the exercise by the shareholder of its right to withdraw securities in sufficient time to tender to
the competing take-over bid or to support the other transaction.
Flip-in Event
Subject to certain exceptions, a “Flip-in
Event” occurs when an Acquiring Person becomes the Beneficial Owner of 20% or more of the Voting Shares. In the event that, prior
to the Expiration Time, a Flip-in Event which has not been waived by the Board occurs (see “Redemption, Waiver and Termination”
below), effective at the close of business on the 10th trading day after the Stock Acquisition Date, each Right (except for Rights Beneficially
Owned or which may thereafter be Beneficially Owned by an Acquiring Person or certain of its related parties or transferees, which Rights
will become null and void), may be exercised to purchase from the Company, in accordance with the terms of the Amended and Restated Rights
Plan, that number of Common Shares having an aggregate Market Price on the date of the Flip-in Event equal to twice the Exercise Price,
on payment of the Exercise Price (subject to customary anti-dilution adjustments set forth in the Amended and Restated Rights Plan).
Permitted Bid and Competing Permitted Bid Requirements
A take-over bid that qualifies as a Permitted
Bid or Competing Permitted Bid will not trigger the exercise of the Rights. The requirements for a “Permitted Bid” include
the following:
| 1. | the
take-over bid must be a formal (i.e., non-exempt) bid made to all holders of record of Voting Shares, other than the bidder; |
| 2. | the
take-over bid contains irrevocable and unqualified conditions that no Voting Shares and/or Convertible Securities will be taken up or
paid for: (i) prior to the close of business on the date which is not less than 105 days following the date of the take-over bid or such
shorter minimum deposit period that a take-over bid (that is not exempt from any requirements of Division 5 (Bid Mechanics) of NI 62-104)
must remain open for deposits of securities, in the applicable circumstances at such time, pursuant to NI 62-104; and (ii) then only
if, at the close of business on the date the Voting Shares and/or Convertible Securities are first taken up and/or paid for under such
take-over bid, more than 50% of the Voting Shares held by Independent Shareholders have been deposited or tendered to the take-over bid
and not withdrawn; |
| 3. | unless
the take-over bid is withdrawn, securities deposited or tendered pursuant thereto may be withdrawn until taken up and paid for; and |
| 4. | unless
the take-over bid is withdrawn, in the event that the deposit condition set forth in paragraph 2(ii) above is satisfied, the bidder will
make a public announcement of that fact and the take-over bid will remain open for deposits and tenders of Voting Shares and/or Convertible
Securities for not less than 10 days from the date of such public announcement. |
A “Competing Permitted Bid” is a
take-over bid that:
| 1. | is
made after a Permitted Bid or another Competing Permitted Bid has been made and prior to its expiry or withdrawal; |
| 2. | satisfies
all the requirements of a Permitted Bid other than the requirement set forth in paragraph 2(i) of the requirements for a Permitted Bid
set forth above; and |
| 3. | contains
an irrevocable and unqualified condition that no Voting Shares and/or Convertible Securities will be taken up or paid for prior to the
close of business on the last day of the minimum initial deposit period that such take-over bid must remain open for deposits or tenders
of securities pursuant to NI 62-104 after the date of the take-over bid constituting the Competing Permitted Bid. |
“Independent Shareholders” means,
generally, holders of Voting Shares other than any Acquiring Person, any Offeror, any affiliate, associate or joint actor of an Acquiring
Person or Offeror, or any employee benefit plan, deferred profit sharing plan or similar plan or trust for the benefit of employees of
the Company or its subsidiaries unless the beneficiaries of the plan or trust direct how Voting Shares will be voted and whether such
shares will be tendered to a take-over bid.
Redemption, Waiver and Termination
The Board may, after having obtained the prior
approval of the holders of Voting Shares or Rights, as applicable, at any time prior to the occurrence of a Flip-in Event, elect to redeem
all but not less than all of the then outstanding Rights at a redemption price of $0.00001
per Right, appropriately adjusted for anti-dilution as provided in the Amended and Restated Rights Plan (the “Redemption Price”).
| | TransAlta Corporation | 2022 Management Proxy Circular | 43 |
The Board may waive the application of the Amended
and Restated Rights Plan in respect of the occurrence of any Flip-in Event if the Board has determined within 10 trading days following
a Stock Acquisition Date that a person became an Acquiring Person under the Amended and Restated Rights Plan by inadvertence and without
any intention to become or knowledge that it would become an Acquiring Person, but the waiver must be on the condition that the Acquiring
Person reduces its Beneficial Ownership of Voting Shares within 14 days after such determination by the Board, or such later date as
the Board may determine, such that the person is no longer an Acquiring Person.
If a person who has made a Permitted Bid, a Competing
Permitted Bid or a take-over bid in respect of which the Board has waived the application of the Amended and Restated Rights Plan consummates
the acquisition of Voting Shares, the Board is deemed to have elected to redeem the Rights at the Redemption Price.
The Board may, prior to the occurrence of a Flip-in
Event that would occur by reason of a take-over bid made by means of a take-over bid circular to all holders of record of Voting Shares
(a “qualified bid”), waive the application of the Amended and Restated Rights Plan to such Flip-in Event upon prior written
notice to the Rights Agent. However, if the Board waives the application of the plan for any such qualified bid, the Board is deemed
to have waived the application of the plan in respect of any other Flip-in Event occurring by reason of any other qualified bid made
prior to the expiry of any bid for which the waiver is, or is deemed to have been, granted.
The Board may, with the prior consent of the
holders of Voting Shares, waive the application of the Amended and Restated Rights Plan to a Flip-in Event at any time prior to the occurrence
of such Flip-in Event, if such Flip-in Event would occur by reason of an acquisition of Voting Shares otherwise than pursuant to a take-over
bid made by means of a take-over bid circular to holders of Voting Shares and otherwise than by inadvertence. If the Board so waives
the application of the plan, the Board must extend the Separation Time to a date at least 10 business days subsequent to the meeting
of Shareholders called to approve such waiver.
Where a take-over bid that is not a Permitted
Bid or Competing Permitted Bid is withdrawn or otherwise terminated after the Separation Time and prior to the occurrence of a Flip-in
Event, the Board may elect to redeem all the outstanding Rights at the Redemption Price. In such event, the Amended and Restated Rights
Plan will continue to apply as if the Separation Time had not occurred and one Right will remain attached to each Common Share as provided
for in the Amended and Restated Rights Plan.
If the Board is deemed to have elected or elects
to redeem the Rights as described above, or where the approval of the holders of Voting Shares or Rights is required and obtained for
such redemption, as the case may be, the right to exercise the Rights will thereupon, without further action and without notice, terminate
and the only right thereafter of the holders of Rights will be to receive the Redemption Price. Within 10 business days of any such election
or deemed election to redeem the Rights, or within 10 business days of the requisite approval of the holders of Voting Shares or Rights,
as the case may be, the Company will notify the holders of the Voting Shares or, after the Separation Time, the holders of the Rights.
Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Upon a redemption of
Rights, the Company is not obliged to make a redemption payment to any holder of Rights unless the holder is entitled to receive at least
$1.00 in respect of all Rights held by such holder.
Supplements and Amendments
TransAlta may, without the approval of the holders
of Voting Shares or Rights, make amendments: (i) to correct clerical or typographical errors; and (ii) to maintain the validity and effectiveness
of the Amended and Restated Rights Plan as a result of any change in applicable legislation, regulations or rules thereunder. Any amendment
referred to in (ii) must, if made before the Separation Time, be submitted for approval to the holders of Voting Shares at the next meeting
of Shareholders and, if made after the Separation Time, must be submitted to the holders of Rights for approval.
Prior to the Separation Time, TransAlta may,
with the prior consent of holders of Voting Shares received at the special meeting called and held for such purpose, amend, vary or rescind
any of the provisions of the Amended and Restated Rights Plan and the Rights, whether or not such action would materially adversely affect
the interests of the holders of Rights generally. After the Separation Time, TransAlta may, with the prior consent of the holders of
Rights received at the meeting called and held for such purpose, amend, vary or rescind any of the provisions of the Amended and Restated
Rights Plan and the Rights, whether or not such action would materially adversely affect the interests of the holders of Rights generally.
Rights Agent
The Amended and Restated Rights Plan contains
customary provisions concerning the duties, liabilities, indemnification and replacement of the Rights Agent.
| | TransAlta Corporation | 2022 Management Proxy Circular | 44 |
Proposed Rights Plan Resolution
At the Meeting, Shareholders will be asked to
consider and, if deemed appropriate, pass an ordinary resolution ratifying, confirming and approving the Amended and Restated Rights
Plan, substantially in the form and on the terms of the Amended and Restated Rights Plan (the “Rights Plan Resolution”).
In accordance with the Amended and Restated Rights Plan, the Rights Plan Resolution must be passed by a majority (e.g., 50% plus one)
of the votes cast by the Independent Shareholders present in person, or represented by proxy, at the Meeting. As described above, Independent
Shareholders are all Shareholders other than, generally, an Acquiring Person or a person making a take-over bid for the Voting Shares
and any affiliate or associate of, or any person acting jointly or in concert with, either of them. The Company is not aware of any Shareholder
which is not an Independent Shareholder and therefore required to be excluded from such vote. The TSX requires that the Rights Plan Resolution
be passed by a majority (e.g., 50% plus one) of the votes cast by the Shareholders present in person, or represented by proxy, at the
Meeting. The Rights Plan Resolution, as set forth below, is subject to such amendments, variations or additions as may be approved at
the Meeting:
“BE IT RESOLVED
THAT:
| 1. | the
continuance, amendment and restatement of the Rights Plan, the terms and conditions of which are set out in the Amended and Restated
Rights Plan to be dated on or about April 28, 2022, between the Company and Computershare Trust
Company of Canada, as Rights Agent, as approved by the Board on February 23, 2022, and substantially as described in the Management Proxy
Circular of the Company dated March 18, 2022, be and is hereby ratified, confirmed and approved without amendment; |
| 2. | the
actions of the directors of the Company in adopting the Amended and Restated Rights Plan and in exercising and delivering the Amended
and Restated Rights Plan be and are hereby ratified, confirmed and approved; and |
| 3. | any
director or officer of the Company be and is hereby authorized and directed to execute and deliver for and in name of and on behalf of
the Company all such certificates, instruments, agreements, documents and notices and to do all such other acts and things as in such
person’s opinion may be necessary or desirable for the purpose of giving effect to this resolution.” |
Recommendation of the Board
The
Board believes that the Amended and Restated Rights Plan is in the best interests of the Company and unanimously recommends
a vote
FOR the approval of the Rights Plan Resolution. Unless otherwise instructed, the persons designated in the Proxy intend to
vote FOR the approval of the Rights Plan Resolution. Vote FOR the approval of the Rights Plan Resolution on the Proxy
today. |
6. Other Business
As of the date of this Proxy Circular, the Board
and management are not aware of any other items of business to be brought before the Meeting. If there are changes or new business at
the Meeting, your proxyholder can vote your common shares on these items as proxyholder sees fit.
Following the conclusion of the formal business
to be conducted at the Meeting, we will invite questions and comments from registered Shareholders and duly appointed proxyholders.
| | TransAlta Corporation | 2022 Management Proxy Circular | 45 |
Governance
We believe that responsible and transparent corporate
governance practices provide us with a framework for exercising timely and effective decisions and serve as a foundation for our commitment
to you, and other stakeholders, in representing your and other stakeholders’ interests with integrity, honesty and ethical conduct.
This section discusses TransAlta’s corporate
governance practices and provides information pertaining to our Board and its Committees.
Our Governance Practices
TransAlta is listed on the TSX, under the trading
symbol “TA”, and the NYSE, under the trading symbol “TAC”, and is subject to the governance regulations, rules and
standards applicable under both exchanges. Our corporate governance practices meet or exceed the governance requirements of the TSX and
the Canadian Securities Administrators, including:
| · | National
Instrument 52-109 — Certification of Disclosure in Issuers’ Annual and Interim Filings |
| · | National
Instrument 52-110 — Audit Committees |
| · | National
Policy 58-201 — Corporate Governance Guidelines |
| · | National
Instrument 58-101 — Disclosure of Corporate Governance Practices |
As a “foreign private issuer” under
US securities laws, we are generally permitted to comply with Canadian corporate governance requirements. The NYSE governance rules require
us, however, to disclose any significant ways in which our corporate governance practices differ from those followed by US domestic issuers,
and this disclosure can be found in Appendix “A” to this Proxy Circular under the heading “New York Stock Exchange —
Significant Differences in Corporate Governance Practices” and on our website at www.transalta.com/investor-centre/governance.
Our corporate governance practices also comply with applicable requirements enacted under SEC rules initiated under Sarbanes-Oxley and
also incorporate a number of best practices, including certain recommendations by the Canadian Coalition for Good Governance.
The key elements
of TransAlta’s governance practices are:
| · | ensuring
employees, management and the Board are committed to ethical business conduct, integrity
and honesty; |
| · | establishing
key policies and standards to provide a framework for how we conduct our business; |
| · | retaining
directors, other than our CEO, who are independent; |
| · | having
a Board with individuals who have a mix of diversity, skills, knowledge and experience, including
the core competencies identified in our skills matrix to maximize the effectiveness of the
Board and its Committees and oversight of the execution of our strategies; |
| · | maximizing
the effectiveness of the Board, its Committees and individual directors through annual evaluations
and continuing education of our directors; and |
| · | facilitating
and fostering an open dialogue between our management and the Board with our Shareholders
and community stakeholders. |
Our Ethical Commitment
Codes of Conduct
One of our most
valuable assets is our reputation. A strong commitment to ethical conduct is a basic element of our corporate governance. We have adopted
the following codes of conduct to guide our business decisions and everyday business activities:
| · | Directors’
Code of Business Conduct, which applies to our directors; |
| · | Corporate
Code of Conduct, which applies to all employees, officers and consultants of TransAlta and
its subsidiaries; |
| · | Finance
Code of Ethics, which applies to all financial employees of the Company; |
| · | Energy
Trading Code of Conduct, which applies to all our employees engaged in energy marketing;
and |
| · | Supplier
Code of Conduct, which applies to the Company’s suppliers and vendors. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 46 |
Our codes of conduct outline the standards and
expectations we have for our employees, officers, directors, consultants and suppliers with respect to, among other things, the protection
and proper use of our assets. The codes also provide guidelines with respect to securing our assets, conflicts of interest, respect in
the workplace, social responsibility, privacy, compliance with laws, insider trading, environment, health and safety and our commitment
to ethical and honest conduct. Our Directors’ Code of Business Conduct and Corporate Code of Conduct go beyond the laws, rules and regulations
that govern our business in the jurisdictions in which we operate; they outline principal business practices with which all directors,
employees and consultants must comply. Our employees, officers and directors are reminded annually about the importance of ethics and
professionalism in their daily work, and must certify annually that they have reviewed and understand their responsibilities as set forth
in the respective codes of conduct. This certification also requires our employees, officers and directors to acknowledge that they have
complied with the standards set out in the respective code during the last calendar year. In 2021, the Company undertook mandatory Code
of Conduct training for all employees and was able to achieve 100% participation.
The Company has adopted a Supplier Code of Conduct
that requires suppliers (and their employees and contractors) of goods and services to the Company to adhere to the Company’s values,
including as it pertains to health and safety, ethical business conduct, labour issues and human rights, conflicts of interest and environmental
leadership. Suppliers can report any concerns related to the Supplier Code of Conduct using TransAlta’s Ethics Helpline and disclose
any actual or perceived conflicts of interest via email to conflicts@transalta.com. All concerns raised will be kept in confidence to
the extent appropriate and permitted by law. Information will only be shared in circumstances where it is necessary to completely and
fairly resolve the concern. The Ethics Helpline can be reached at 1 (855) 374-3801 (Canada/US) and 1-800-40-5308 (Australia) or via the
Internet at: www.transalta.com/ethics-helpline. A complete copy of our Supplier Code of Conduct is available on SEDAR at www.sedar.com
and on EDGAR at www.sec.gov and is also available on our website at www.transalta.com/investor-centre/governance.
As part of our commitment to good corporate governance,
the Directors’ Code of Business Conduct provides guidance and principles to govern the performance of our directors’ duties and to foster
a culture of honesty, integrity and accountability, consistent with the applicable principles espoused in our Corporate Code of Conduct.
A complete copy of our Directors’ Code of Business Conduct is available under our profile on SEDAR at www.sedar.com and on EDGAR
at www.sec.gov and is also available on our website at www.transalta.com/investor-centre/governance.
Our Finance Code of Ethics outlines the obligations
of our financial employees to provide accurate, complete, objective and relevant financial information, while our Energy Trading Code
of Conduct focuses on preventing, detecting and deterring violations of laws and regulations relating to our energy trading and marketing
business.
Copies of our codes of conduct for directors,
officers, employees, suppliers, traders and financial employees are available on our website at www.transalta.com/investor-centre/governance.
In addition, our Whistleblower Policy provides
a mechanism for our employees, officers, and directors to report, among other things, any actual or suspected ethical or legal violations.
We would seek to remedy the impact promptly in order to establish a corrective action plan in collaboration with the relevant individuals
and stakeholders.
Handling Conflicts of Interest and Related Party Transactions
At TransAlta, we expect and promote a culture
of integrity and ethical business conduct by requiring employees, officers, and directors to conduct their personal business and affairs
in a manner that ensures that their private or personal interests do not interfere or appear to interfere with the interests of the Company.
Our policies provide that each director and executive officer must comply with the disclosure requirements of the CBCA regarding any
interest in material contracts or material transactions or proposed material contracts or proposed material transactions. If a declaration
of material interest is made, the declaring director shall not vote on the matter if put to a vote of the Board. In addition, under the
Directors’ Code of Business Conduct, directors are more generally required to avoid any activity that could compromise, or appear to
compromise, the performance of their duties and responsibilities or their objectivity and exercise of sound, ethical business judgment
in the performance of their duties. Directors faced with an actual or potential conflict of interest, including those that may arise
because of a director’s (or a relative’s) interests or relationships outside the Company may be asked to recuse themselves from any deliberations
with respect to the matter.
The Audit, Finance and Risk Committee (“AFRC”)
has also adopted amendments to its Charter to expressly assist the Board in its oversight of material transactions involving related
parties. The AFRC will consider the related party transaction and may recommend the use of a standing committee or an ad hoc special
committee to assist the Board in the evaluation of any such related party transactions. The AFRC is considered the appropriate committee
to initially assess related party transactions given the additional independence requirements required of each committee member pursuant
to applicable securities laws. For the purposes of this policy, the term “related party” include entities that the Company
controls, but are not wholly-owned, and applies to any agreement entered into with such a related party that has a value in excess of
$30 million (based on the aggregate value of the contract). In the past, the Board has established special committees to consider
related party transactions, including in regard to the sale of certain assets to TransAlta Renewables Inc.
| | TransAlta Corporation | 2022 Management Proxy Circular | 47 |
Insider Trading
The Company maintains an insider trading policy
(“Insider Trading Policy”) and reporting guidelines that place restrictions on “insiders” and those in a special
relationship with TransAlta from trading in TransAlta shares and other securities of the Company. Our policy meets the requirements of
the stock exchanges on which our shares are listed as well as those of corporate law and includes the following
measures:
| · | Establishment
of quarterly and annual trading blackout periods when financial results are being prepared
and have not yet been publicly disclosed. These blackouts extend to all employees engaged
in the preparation of our financial results and all officers and directors. The blackouts
are effective from the first day following the end of a quarter or fiscal year-end and end
at the close of trading on the second trading day after we issue the news release or disclose
our financial results; |
| · | Publishing
and communicating the dates for regular blackout periods and sending a monthly reminder to
all reporting insiders of their obligations; |
| · | Establishment
of special trading blackouts at times when employees, for business reasons, may be in possession
of material non-public information; and |
| · | Requiring
all reporting insiders to pre-clear securities trading transactions. |
Whistleblower Procedures
Our whistleblower procedures help uphold our
strong values and preserve our culture of ethical business conduct. Our procedures are not limited to accounting, auditing and financial
processes, and instead provide employees, contractors, Shareholders and other stakeholders the ability to report ethical violations,
violations of laws or Company policies or any other potentially material matters they wish to bring to the attention of our Board through
the AFRC. All submissions can be made directly to the Chair of the AFRC by identifying the submission with “subject matter 003”.
Submissions can also be made anonymously or confidentially and may be made using our toll-free number or via our Ethics Helpline at www.transalta.com/ethics-helpline.
Complaints are investigated by the Company’s ethics investigations committee under the oversight of the AFRC. The AFRC receives all incidents,
complaints or information reported through the Ethics Help Line addressed to the AFRC or relating to potential or suspected material
breaches of securities laws, accounting, internal accounting controls, auditing or financial reporting matters and any material ethical
or legal violation. If the findings are urgent, they will be reported to the Chair of the AFRC immediately.
The Board’s Mandate
General Governance Guidelines
Our Board is responsible for the stewardship
of the Company, overseeing the execution of the Company’s strategies and establishing our key policies and standards, including policies
for the assessment and management of our risks. The Board has adopted General Governance Guidelines for the Board to provide a framework
for how we conduct our business and to help us meet our responsibilities. These guidelines include a general overview of the Board’s
role in our governance, a statement of key principles and policies applicable to the Board and its committees, and a mandate that describes
the Board’s major responsibilities, goals and duties. We believe that these practices benefit all stakeholders and form the building
blocks for long-term success. These guidelines are reviewed annually by the GSSC and the Board to ensure they reflect the most appropriate
governance standards for the Company. Our guidelines may be found in Appendix “B” to this Proxy Circular and on our website
at www.transalta.com/investor-centre/governance.
Board Relationships with Management
In accordance with the General Governance Guidelines,
the Board has delegated to the CEO and senior management the responsibility for the day-to-day management of the business and affairs
of the Company. Nevertheless, the Board takes an active and engaged role in working with senior management and overseeing the strategies,
risks, governance and affairs of the Company. In addition to those matters that must, pursuant to applicable laws and our by-laws, be
approved by the Board, the Board has delegated to management the authority to approve expenditures within specified limits. The Board
retains responsibility for significant matters such as major changes to strategy or significant transactions, CEO succession planning,
governance and organizational structure, material acquisitions and divestitures, major capital expenditures, debt and equity financing
transactions and approval of material environmental policies.
| | TransAlta Corporation | 2022 Management Proxy Circular | 48 |
Terms of Reference for the Chair of the Board
The Board has also adopted terms of reference
for the Chair setting out the Chair’s responsibilities and duties. The Board Chair is required to be independent within the meaning of
applicable corporate and securities laws. The Chair is responsible for the leadership of the Board and ensuring that the Board governs
the Company’s business and affairs. To lead the Board in fulfilling its duties, the Chair ensures that the Board has sufficient information
to make business decisions; establishes the frequency of Board meetings, coordinates, in conjunction with the CEO, Chief Operating Officer,
Executive Vice President, Legal, Commercial and External Affairs and the Corporate Secretary, the agenda for the Board and Shareholder
meetings, and works closely with each Committee Chair to establish agendas for each Committee meeting and ensure that each of the Committee’s
functions is effectively carried out. In addition to the role of a leading the Board, the Chair is an essential link between the Board
and the CEO in ensuring that the CEO is aware of any concerns raised by the Board and that the Board promptly receives information pertaining
to management strategies, plans and performance matters. A copy of the terms of reference for the Chair can be found on our website at
www.transalta.com/investor-centre/governance.
Committee Charters and Committee Chair Position Descriptions
The Board has delegated various responsibilities
to four standing committees, which in turn regularly report and make recommendations (when applicable) to the full Board: (i) Audit,
Finance and Risk; (ii) Governance, Safety and Sustainability; (iii) Human Resources; and (iv) Investment Performance. The Chair of each
Committee, who is guided by a Committee Charter, is responsible for the organization of the Committee and fulfillment of its mandate
and works closely with the Board Chair to ensure the Committee’s functions are effectively carried out. The Committee Charters, along
with the Board Chair position description, can be found on our website at www.transalta.com/investor-centre/governance.
Please see each Committee’s report in this Proxy
Circular for an overview of their principal functions and activities during 2021.
CEO Position Description
We also have a position description for our CEO
that is reviewed annually by our CEO and the HRC and is approved by the Board. A copy of the position description is available on our
website at www.transalta.com/investor-centre/governance.
The Board considers the responsibilities set
out in our General Governance Guidelines for the Board, each of the Committee Charters, including the Committee Chair responsibilities
and the terms of reference for the Chair of the Board, to be comprehensive descriptions of the roles and responsibilities of the Board,
the Chair of the Board, each of the Committee Chairs, each Committee and each director.
Strategic Planning
The Board also has oversight of our strategy
and strategic planning process and closely monitors, collaborates with and oversees management’s performance in executing on our strategy
and meeting the objectives of our strategic plan.
The Board meets annually for a strategic planning
session with management in which it reviews, discusses and approves the Company’s strategic plan and progress made towards achieving
the plan. The Board regularly engages in discussions and reviews the Company’s strategies and potential alternatives, addressing
the evolving needs and circumstances of the Company and the environments in which we operate, with the presence of, and without, senior
management, and with the benefit of advice from outside financial advisors and consultants, as appropriate. The Board also periodically
holds in camera meetings without the presence of the CEO or other management in order to assess, test and discuss the Company’s
strategic plan and priorities, and alternatives thereto, with a view to ensuring the appropriateness and execution of the Company’s strategic
plan with a view to maximizing Shareholder value.
The Board reviews and updates its strategic plan
annually during strategic planning sessions. As part of this strategic planning session, management provides an assessment on the competitive
environment, growth opportunities, regulatory environment and capital allocation in order to identify opportunities and risks to our
business strategy. In 2021, this strategic planning session was held in-person and included considering
growth initiatives and strategies, the evaluation of the coal-to-gas conversions and the repowering of Sundance Unit 5, an assessment
of the Alberta electricity market and power prices, and other matters of strategic importance to the Company. The Board also considered
the future cash profile of the Company and, in September 2021, approved an 11% dividend increase.
In 2019, the Company entered into an investment
agreement (the “Investment Agreement”) with Brookfield BRP Holdings (Canada) Inc., an entity affiliated with Brookfield Renewable
Partners L.P. and Brookfield Asset Management, Inc. (collectively, “Brookfield”), pursuant to which Brookfield agreed to
invest $750 million in the Company (the “Brookfield Investment”) through the purchase of exchangeable securities, which will
be convertible into up to a 49% equity ownership interest in an entity established to hold the Company’s Alberta hydro assets in
the future at a value based on a multiple of the future adjusted EBITDA of such hydro assets. On May 1, 2019, Brookfield invested the
initial tranche of $350 million in the Company in exchange for 7% unsecured subordinated debentures. The second tranche of the Brookfield
Investment closed in October 2020, pursuant to which Brookfield invested the remaining $400 million in the Company in exchange for a
new series of redeemable, retractable first preferred shares. Further details concerning the Brookfield Investment are contained in the
Company’s Annual Report and Annual Information Form for the year ended December 31, 2021, copies of which are available under our
profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
| | TransAlta Corporation | 2022 Management Proxy Circular | 49 |
Environmental, Social and Governance
The GSSC assists the Board in fulfilling its
oversight responsibilities with respect to the formulation and implementation of the policies, standards and practices with respect to
climate change, health, safety and environment, and social well-being, including human rights, working conditions and responsible sourcing
and related risks. The Board takes the safety of the Company’s employees and contractors very seriously and the GSSC reviews quarterly
the safety performance of the Company.
In 2021, CDP (formerly Climate Disclosure Project)
recognized TransAlta with a B score, ranking us above the North American regional average of C and representing the highest score achieved
by companies in the thermal power generation sector. Our alignment with the Task Force on Climate-Related Financial Disclosures (TCFD)
recommendations include key findings of a climate-related scenario analysis conducted in 2021. In January 2022, TransAlta became the
first publicly traded Canadian energy company to join the global list of companies committed to setting a science-based greenhouse gases
(“GHG”) emissions target. In December 2017, Canada’s Chartered Professional Accountants recognized our climate change reporting
as “outstanding.” In 2015, the Company scored 100% for disclosure on climate change related management and performance and
was added to the Disclosure Leadership Index in Canada (top 20 in Canada). The GSSC annually reviews and makes recommendations regarding
the Company’s guidelines and practices relating to environmental protection, including the GHG mitigation and considers whether our environmental
procedures are being effectively implemented.
We have a long
history of adopting leading sustainability practices, including voluntarily integrating our sustainability report into our Annual Report
since 2015 and aligning our environmental, social and governance (“ESG”) goals with the UN Sustainable Development Goals.
The key components of the Company’s approved 2021 ESG targets include:
| · | by
2026, achieving company-wide GHG reductions of 75% below 2015 levels and by 2050 achieving
carbon neutrality; |
| · | by
2026, achieving a 95% reduction of SO2 emissions and an 80% reduction of NOx emissions
over 2005 levels from TransAlta’s coal facilities; |
| · | a
continued focus on safe operations and environmentally sustainable practices, including by
undertaking significant reclamation work; |
| · | undertaking
initiatives that will enhance the environmental performance of the Company, including the
termination of coal generation in Canada since 2021 and company-wide by the end of 2025; |
| · | supporting
equal access to all levels of education for youth and Indigenous peoples through financial
assistance and employment opportunities; |
| · | enhancing
our commitment to workplace diversity and adopting a target of 50% female membership on the
Board by 2030 and achieving gender diversity of at least 40% female employment for all employees
by 2030; and |
| · | by
2026, achieving company-wide GHG reductions of 75% below 2015 levels and by 2050 achieving
carbon neutrality. |
The full details
of the approved ESG targets are available at www.transalta.com/sustainability and more information regarding
these ESG targets and the Company’s ESG performance are also included in the Company’s Annual Report for the year ended December
31, 2021.
Responding to the COVID-19 Pandemic
Throughout 2021, the Company maintained and modified
our COVID-19 protocol as required due to the changing and ongoing nature of the pandemic. The Company continued to operate under its
business continuity plan, which focused on ensuring that: (i) employees that could work remotely did so; and (ii) employees that operate
and maintain our facilities, and who were not able to work remotely, were able to work safely and in a manner that ensured they remained
healthy.
| | TransAlta Corporation | 2022 Management Proxy Circular | 50 |
The Board and management have been monitoring
the development of the outbreak and are continually assessing its impact on the Company’s operations, supply chains and customers
as well as, more generally, to the business and affairs of the Company. To manage the risks resulting from COVID-19, we have taken a
number of steps in furtherance of the Company’s business continuity efforts, including as set forth below:
| Responses to the COVID-19 Pandemic |
| Management Responses |
· |
Regularly communicated with the Board and employees in regard
to the Company’s response to COVID-19; |
| |
· |
Maintained and updated COVID-19 safety protocols, including
a back-to-office and site strategy, including a remote work strategy, that will remain in place until the pandemic becomes endemic; and
|
| |
· |
Developed leadership plans, including contingent authorities. |
| Policy Changes |
· |
We continue to align all non-essential travel and quarantine
requirements with local jurisdictional guidance for all TransAlta employees and contractors for all jurisdictions in which we operate.
|
| Employee Changes |
· |
Provided continued assurances to employees that their employment
with TransAlta would not be impacted by the COVID-19 pandemic; |
| |
· |
Maintained health screening procedures, including questionnaires
and temperature tests, enhanced cleaning measures and strict work protocols at TransAlta’s offices and facilities in accordance
with our back-to-office and site strategy to ensure that employees remain safe; |
| |
· |
Maintained policies to seamlessly allow non-essential employees
to work remotely, as appropriate; and |
| |
· |
Provided COVID-19 related town halls and information sessions
for employees featuring medical professionals and epidemiologists. |
| Operational Changes |
· |
Modified our operating procedures and implemented restrictions
to non-essential access to our facilities to support continued operations through the pandemic; |
| |
· |
Reviewed the supply chain risk associated with all key power
generation process inputs and implemented weekly monitoring for changes in risk; |
| |
· |
Reached out to key supply chain contacts to determine strategies
and contingencies to ensure we could continue to progress our growth projects, wherever possible; and |
| |
· |
Identified new cybersecurity risks associated with phishing
emails and enhanced security protocols and increased awareness of potential threats. |
| Financial Oversight |
· |
Continued to maintain a comprehensive commodity hedging program
for our merchant assets that can respond to changes in underlying market conditions; |
| |
· |
Continued to monitor counterparties for changes in creditworthiness
as well as monitor their ability to meet obligations; and |
| |
· |
Continue to monitor the situation and communicate with our
key lenders on any foreseeable impacts and on our response to the crisis. We maintain a strong financial position and significant liquidity
with our existing committed credit facilities. |
The Company continues to actively monitor the
situation and advice from public health officials with a view to responding to changing recommendations and adapting our response and
approach as necessary.
Risk Management
The Board is responsible
for overseeing the Company’s risk identification, management and mitigation strategies and the risk assessment process, including:
| · | making
sure we identify our principal risks and assess those risks annually, taking into consideration
our risk appetite and any potential changes in our business or the marketplace; |
| · | monitoring
our risk management programs through the work of the Committees, which report to the Board;
and |
| · | ensuring
that management has put in place appropriate systems to identify, mitigate and manage the
Company’s risks and that residual risks remain within our risk appetite. |
We have adopted
a comprehensive Enterprise Risk Management framework that evaluates the risks from each of our major businesses. This process involves
analyzing both existing and emerging risks in defined categories and takes into consideration factors that work to mitigate our risks.
| | TransAlta Corporation | 2022 Management Proxy Circular | 51 |
The AFRC is responsible for overseeing the Company’s
processes and key policies for the identification, assessment and management of the Company’s principal risks and annually (or more frequently
as required), reviews the Company’s risks with management and reports to the Board. The AFRC also receives updates on management’s assessment
of our principal business risks at every regularly scheduled quarterly meeting. The HRC is responsible for the review of the Company’s
compensation-related risks and undertakes an annual assessment of those risks, or more frequent assessment if required. The GSSC has
overall responsibility with respect to the Company’s security practices and environmental health and safety policies and practices, and
annually reviews with management the Company’s related policies and risks. The IPC provides oversight of management’s significant investments
and the execution of major Board approved capital expenditure projects that are in furtherance of the Company’s strategic plans
The AFRC, HRC, GSSC and IPC each report to the Board following their respective meetings. The Board conducts an annual comprehensive
review of the Company’s risk assessment in coordination with management. For each material risk that is identified, the Company assigns
an executive officer as being responsible for monitoring and mitigating the impact of such risks.
Internal Controls
The Board, through the AFRC, obtains confirmation
from management, internal auditors and the independent auditors that our internal control systems are operating effectively. The Board
has also delegated to the AFRC the responsibility for reviewing our quarterly and annual financial statements and, as required, for recommending
them to the Board for approval. In addition, the AFRC is responsible for overseeing our internal audit function and our lead Internal
Auditor meets regularly with the Chair of the AFRC without the presence of management.
Meeting without Management or Non-Independent Directors
As a standard item on each regular Board and
Committee agenda, the independent directors are scheduled time to hold in camera sessions, at which non-independent directors
and members of management are not in attendance. In 2021, the Board held in camera sessions of independent directors at the end
of each meeting of the Board. Each of the standing committees of the Board also held in camera sessions. In 2021, the Board held
11, the AFRC held eight, the HRC held seven, the IPC held 10, and the GSSC held five in camera sessions.
Succession Planning
The Board is responsible for the appointment
of our CEO and other members of senior management. The Board believes that talent management and succession planning are critical to
the Company’s continued success. The HRC assists the Board in reviewing senior leadership succession, including for the President and
CEO. The HRC supports the Board in its review and development of succession plans for the President and CEO and other senior management
roles, including through reviews of the Company’s organizational structure and policies and procedures relating to employment, succession
planning and compensation.
In regard to the CEO position, the HRC establishes
and reviews the succession plan for the CEO on an annual basis under a variety of scenarios, including in emergency replacement scenarios.
The HRC works closely with the CEO and the full Board to develop, monitor and assess the Company’s succession plans, including reviewing
the internal talent pool on a regular basis, selecting executive development opportunities, and evaluating performance and progress.
Succession planning will continue to be an important area of focus for the Board and the HRC into the future. The promotion of internal
candidates to significant offices of the Company demonstrates the quality of internal development opportunities available to strong senior
leaders in the Company.
President and Chief Executive Officer succession
has been a significant focus for the HRC and the Board over the past three years, which recently culminated in a smooth transition of
this role from Dawn Farrell to John Kousinioris on April 1, 2021.
Our management succession planning process also
includes identification of high-potential employees. Included in this analysis is a review of skills, talent management and development
needs. If required, independent consultants may be retained in order to assist the HRC in the identification of any skills gap or compatibility
for the role. High-potential employees are also given the opportunity to make presentations in front of the Board in order to gain experience
at that level. The HRC provides oversight to ensure that we have appropriate programs for addressing employee retention and for overseeing
human capital risk.
| | TransAlta Corporation | 2022 Management Proxy Circular | 52 |
Board Characteristics
Independence of Directors
The independence of our directors is assessed
and determined annually by the Board at the recommendation of the GSSC. The GSSC uses the definition of “independence” under
National Policy 58-101 — Disclosure of Corporate Governance Practices and National Instrument 52-110 — Audit Committees.
The independence criteria also conform to the applicable rules of the SEC, the NYSE and those set out in Sarbanes-Oxley. The criteria
are also utilized to assess the independence of any new director appointed or nominated to the Board.
A director is independent if such director does
not have a direct or indirect material relationship with TransAlta. The Board believes that a relationship is material if it could reasonably
interfere with a director’s ability to make independent decisions, regardless of any other association the director may have. The information
required to make this determination is collected through the review of biographical material, discussions with the directors and questionnaires
completed by the directors annually or prior to their appointment. In determining whether a director is independent, the Board reviews
and analyzes the existence, materiality and effect of any relationships between the Company and each of our directors, either directly,
through a family member or as a partner, shareholder or officer of another organization that has a relationship with the Company and
determines, in each case, whether the relationship could, or could reasonably be perceived to, materially interfere with the director’s
ability to act independently of management.
Our independent directors do not receive remuneration
from us in excess of their retainers and reimbursement of reasonable travel fees and, to the extent applicable, travel and meeting fees.
The Board has affirmatively determined that none of the director nominees (with the exception of Mr. John Kousinioris, our President
and CEO), has a material relationship with TransAlta, either directly or indirectly, that could reasonably be expected to interfere with
the exercise of independent judgment. Mr. John Kousinioris, who was appointed President and CEO of the Company on April 1, 2021, and
a director of the Company on April 1, 2021, is not independent by virtue of his role as an executive officer of the Company.
Mr. Goldgut is an officer and Mr. Reid is a former
officer of entities affiliated with Brookfield, an entity that receives fees for having two representatives serve on the Company’s
management hydro operating committee, which is focused on optimizing the operations and maximizing the value of the Company’s Alberta
hydro assets. Brookfield has invested $750 million in the Company pursuant to the Brookfield Investment. The GSSC and the Board reviewed
and considered this relationship and determined that it does not interfere with the exercise of Mr. Goldgut’s or Mr. Reid’s independent
judgment in their role as members of the Board. As a result, Mr. Goldgut and Mr. Reid are independent within the meaning of National
Instrument 58-101 — Disclosure of Corporate Governance Practices and under the NYSE governance standards; however, as a
result of Brookfield receiving an annual management fee of $1,500,000 for serving on the hydro operating committee, they do not satisfy
the additional independence requirements of National Instrument 52-110 — Audit Committees. As a result, Mr. Goldgut and
Mr. Reid cannot serve on the Company’s AFRC as they do not satisfy these additional independence requirements.
Ms. Sharman is an executive officer of CIBC,
a leading Canadian national bank. The Company engages CIBC in the ordinary course of business to provide banking and financial services,
which includes CIBC being included in a syndicate of financial institutions that have made available to the Company a credit facility.
In connection with the provision of these services, CIBC receives fees from the Company and certain affiliated entities. The fees paid
by the Company and its affiliates to CIBC in the last three fiscal years are significantly less than 2% of CIBC’s consolidated
gross revenues. The Company further understands that CIBC will establish procedures to ensure that Ms. Sharman is not made aware of,
or have information pertaining to, TransAlta in her decision-making authority at CIBC. Comparably, Ms. Sharman would recuse herself from
Board discussions relating to matters involving CIBC and would not vote on any such matters. Nonetheless, as a result of the fees payable
to CIBC, Ms. Sharman does not meet the additional independence requirements of National Instrument 52-110 — Audit Committees,
which results in her being unable to serve on the Company’s AFRC.
The Board also considered Ms. Ambrose’s
role at TD Securities Inc. as Deputy Chair and concluded that her role at TD Securities Inc. is not that of an “executive officer”
within the meaning of National Instrument 52-110 — Audit Committees. Although the Board concluded that she meets the additional
independence requirements and is able to serve on the AFRC, Ms. Ambrose does not currently sit on the AFRC.
Board Chair Independence
The Chair of the Board, John P. Dielwart, is
an independent director. He has never served as an executive officer of the Company and the Board has affirmatively determined that he
is independent. The Board has adopted guidelines which, subject to the discretion of the Board, provide that the Chair of the Board shall
be appointed by the Board and shall be responsible for the overall process involved in the work of the Board as well as the development
and effective performance of the Board.
| | TransAlta Corporation | 2022 Management Proxy Circular | 53 |
Diversity
At TransAlta, diversity is a principle that is
supported both by our Board and senior management. In 2015, the Board adopted a Board and Workplace Diversity Policy that recognizes
that a diverse mix of skills, experiences, backgrounds and gender at the Board and senior management levels, as well as within our workforce,
enhances our Company’s competitive advantages. In 2020, the Board adopted an Equity, Diversity, and Inclusion Pledge that commits the
Company to advance equity, diversity and inclusion (ED&I) in the workplace. By undertaking this pledge, the Company will seek to
remove systemic barriers that may prevent diverse employees from thriving, including visible minorities, Indigenous people, members of
the LGBTQ+ community, persons with disabilities and women.
Our Board and Workforce Diversity Policy, which
includes our Equality, Diversity and Inclusion Pledge, is available on our website at www.transalta.com/about-us/governance/board-and-workforce-diversity,
and specifically seeks to advance diversity at the Board and throughout the Company, including as it pertains to women, Indigenous peoples,
persons with disabilities and visible minorities (being persons, other than Indigenous peoples, who are non-Caucasian in race).
The Company also announced industry-leading Board
and company-wide gender targets. On January 16, 2020, the Board approved a target of 50% female membership on the Board by 2030 and achieving
gender diversity of at least 40% of female employment for all employees by 2030. Although the Company does not have a target specific
to executive officers, the workforce target of 40% is expected to continue to result in women being well represented at the executive
level. The Board considers these gender targets to demonstrate the Company’s commitment to diversity and inclusiveness and are
expected to benefit the Company not only by expanding our pool of qualified employees and senior leaders, but also by incorporating different
perspectives and ways of thinking to drive innovation and successfully execute on our strategy. In 2021, the Company established a Sustainability-Linked
Loan that will align the cost of borrowing to TransAlta’s gender diversity targets.
The Company has adopted gender targets
so that by 2030
50% of the Board and 40% of the Company’s
entire workforce will be women. |
|
| |
| |
TransAlta is an active supporter of gender diversity
to ensure diversity of thought, to drive value, to create an attractive work environment, and to follow best business practice. Our commitment
to gender diversity in our business is evidenced by our female participation rates on both our executive team and Board. As of December
31, 2021, men made up 58% (seven male directors) and women made up 42% (five female directors) of our Board composition compared to 45%
in 2020, due to the retirement of one female Board member. In 2021, we achieved 50% female representation on the Board, excluding the
two director nominees from Brookfield. Our Board remains committed to maintaining and increasing the representation of women on the Board
as turnover occurs, taking into account our skills matrix and the skills, background and knowledge desired at that particular time to
fulfil the Board’s mix of skills and experience. With respect to executive officer positions, we have three women (33.3%) and six men
(66.6%). Women make up approximately 24% of our total workforce, an increase over 2020 levels.
In 2021, we pioneered a female apprenticeship program to strategically target the recruitment of high
potential female students and train them to gain valuable experiential learning in the trades. The female apprenticeship program has
created a pipeline of future female talent for the Company and has resulted in us being able to creatively target, recruit, hire
and retain the first-ever female wind technicians, as well as the first females in the roles of instrumentation technician, electrical
technician and power plant operator in our gas fleet in Alberta.
TransAlta has been and remains committed to diversity
as is exhibited both by the number of women on its Board and in senior management positions. As of December 31, 2021, the Board and executive
officers do not currently include any visible minorities, Indigenous peoples, or persons with disabilities (each, a “designated
group”). Although the Company specifically adopted a goal of advancing diversity throughout the Company with regard to individuals
that identify with a designated group, the Company and its material subsidiaries have not adopted a target number or percentage for any
of the three categories comprising a designated group. Rather than adopting targets at the Board and executive level, the Company is
focused on applying the Company’s Board and Workplace Diversity Policy to promote employment and advancement opportunities for
individuals within a designated group throughout the Company rather than being focused only on the most senior levels of the organization.
The Company believes this is a more meaningful and sustainable approach to improving diversity and inclusion throughout the Company’s
workforce, which should over time result in individuals that identify with a designated group being promoted internally to more senior
positions, including executive officer positions.
On May 3, 2021, the Company announced that we
received certification from a third party that specializes in measuring and tracking ED&I metrics for organizations, due to our continued
commitment to and meaningful performance on ED&I in the workplace. The Company also developed a five-year ED&I strategy (“ED&I
Strategy”) that was approved by the Board in August 2021. The first phase of this strategy focuses on raising awareness to build
a foundation and common understanding. upon which our co-workers can have meaningful conversations
to learn about one another. The second phase aims to reinforce and embed inclusive behaviours. To execute the first stage of the
strategy, in 2021, we committed to and began the development of Indigenous Awareness training that will be provided to all Canadian,
Australian and US employees by the end of 2030. Furthermore, in 2021, we launched our Women in Trades Scholarship program with 13 different
educational institutions for eligible female-identifying students enrolled in post-secondary trade programs. The Women in Trades Scholarship
is intended to assist women in obtaining an education in trades by showcasing and rewarding successful female role models.
| | TransAlta Corporation | 2022 Management Proxy Circular | 54 |
TransAlta was once again added to the Bloomberg
Gender-Equality Index in 2021, which expanded to represent 44 countries and regions, and comprises 380 companies across 11 sectors. The
Bloomberg Gender-Equality Index tracks the financial performance of public companies committed to supporting gender equality through
policy development, representation, and transparency. Inclusion in this index is assessed against 75 metrics, each allocated to one of
five pillars: (i) Female Leadership and Talent Pipeline; (ii) Equal Pay and Gender Pay Parity; (iii) Inclusive Culture; (iv) Sexual Harassment
Policies; and (iv) Pro-Women Brand.
At the management level, through our development
process, TransAlta has committed to providing employees with diverse backgrounds internal opportunities for growth within our operations
to enhance our pipeline of talent available for succession. As part of the Company’s employment practices, we work to ensure gender
diversity in our executive succession as well as in candidate slates for all open executive officer positions, which can be evidenced
by the recruitment of two accomplished women executives in 2018, the appointment of one woman as a Senior Vice President in 2020 and
one women as the Corporate Controller in 2021. To monitor our progress on the advancement of women and to develop a healthy pipeline
of female talent, we also:
| • | ensure that any list of potential Board nominees includes at
least 50% women; |
| • | maintain a list exclusively of highly qualified women director
nominees; |
| • | identify top talent and implement development plans for high-potential
women; |
| • | ensure pay equity between men and women (we have proactively
adjusted pay throughout the Company to align pay between men and women that perform similar roles on several occasions over the past
five years, including during the pandemic in 2020 and 2021); |
| • | actively seek recruitment of women in key roles within the Company; |
| • | monitor the number of women in senior leadership roles and those
in the pipeline as emerging leaders; and |
| • | connect female talent with senior leaders to accelerate the
development and advancement of high-potential women. |
As well, female advancement in the Company and
the potential for unconscious bias is a topic specifically addressed by the HRC.
As at December 31, 2021, women accounted for
approximately 24% of the entire workforce, which is broken down in greater detail in the below table:
| | |
| | |
| | |
| | |
Total % within Stratum | | |
Total % of all Employees | |
| | |
Male | | |
Female (1) | | |
Total | | |
Male | | |
Female(1) | | |
Male | | |
Female(1) | |
| Board of Directors | |
| 7 | | |
| 5 | | |
| 12 | | |
| 58.33 | % | |
| 41.67 | % | |
| 0.54 | % | |
| 0.39 | % |
| Chief and Executive | |
| 5 | | |
| 2 | | |
| 7 | | |
| 71.43 | % | |
| 28.57 | % | |
| 0.39 | % | |
| 0.15 | % |
| Senior Vice President | |
| 1 | | |
| 1 | | |
| 2 | | |
| 50.00 | % | |
| 50.00 | % | |
| 0.08 | % | |
| 0.08 | % |
| Vice Presidents | |
| 13 | | |
| 4 | | |
| 17 | | |
| 76.47 | % | |
| 23.53 | % | |
| 1.00 | % | |
| 0.31 | % |
| Managers | |
| 65 | | |
| 23 | | |
| 88 | | |
| 73.86 | % | |
| 26.14 | % | |
| 5.02 | % | |
| 1.78 | % |
| Supervisors | |
| 106 | | |
| 24 | | |
| 130 | | |
| 81.54 | % | |
| 18.46 | % | |
| 8.19 | % | |
| 1.85 | % |
| Staff | |
| 782 | | |
| 256 | | |
| 1,038 | | |
| 75.34 | % | |
| 24.66 | % | |
| 60.43 | % | |
| 19.78 | % |
| Total | |
| 979 | | |
| 315 | | |
| 1,294 | | |
| — | | |
| — | | |
| 75.66 | % | |
| 24.34 | % |
Note:
| (1) | The data in this table does not reflect self-identification,
it only identifies male or female. Nevertheless, the Company encourages directors, officers and employees to self-identify their preferred
gender identity, including non-binary identities. |
Year-over-Year Comparison
| Year | |
Total Employees (%
Female)(1) | | |
Board Members (%
Female)(1) | |
| 2021 | |
| 24.34 | | |
| 41.67 | |
| 2020 | |
| 22.00 | | |
| 45.45 | |
| 2019 | |
| 18.00 | | |
| 44.00 | |
Note:
| (1) | The data in this table does not reflect self-identification,
it only identifies male or female. Nevertheless, the Company encourages directors, officers and employees to self-identify their preferred
gender identity, including non-binary identities. |
Through the targets set by the Board, year over
year, the Company has surpassed those of many other public issuers that aspire to the 30% Club in Canada and is on track to achieve gender
parity on the Board in 2030. Furthermore, the Company has made strides from 2019 to increase the recruitment, hiring and retention of
women throughout the workforce.
| | TransAlta Corporation | 2022 Management Proxy Circular | 55 |
The Company has only one “material subsidiary”
(as such term is defined by the CBCA), being TransAlta Renewables Inc. As at December 31, 2021, at TransAlta Renewables Inc. women accounted
for approximately 37.5% and 17% of the Board and executive, respectively, as set forth in the table below:
| | |
Board | | |
Executives | |
| Material
Subsidiary(1) | |
Male
(%) | | |
Female(2)
(%) | | |
Male
(%) | | |
Female(2)
(%) | |
| TransAlta Renewables Inc. | |
| 62.5 | % | |
| 37.5 | % | |
| 83 | % | |
| 17 | % |
Notes:
| (1) | TransAlta Generation Partnership also meets the definition of
a “Material Subsidiary” although it is managed by TransAlta and does not have its own board of directors or executive team. |
| (2) | The data in this table does not
reflect self-identification, it only identifies male or female. Nevertheless, the Company
encourages directors, officers and employees to self-identify their preferred gender identity,
including non-binary identities. |
Attendance
We expect directors to attend all regularly scheduled
Board and Committee meetings. As well, we expect our directors to attend our Company’s annual meetings of Shareholders. In addition,
should special Board or Committee meetings be required, we make every effort to schedule such meetings to accommodate the attendance
of the majority of directors.
Other Public Company Directorships/Committee Appointments
The Board has not adopted guidelines setting
the specific number of other boards and committees on which a director may serve. However, each director’s position(s) on outside boards
or committees is taken into account as part of the annual robust assessment of each director’s individual contributions and effectiveness;
as a general principle, our directors recognize that Board and Committee service requires significant time and attention in order to
properly discharge their responsibilities, and that service on boards or committees of other organizations should be consistent with
that principle, as well as the Company’s conflict of interest standards set out in our Directors’ Code of Business Conduct.
The following table outlines other public company
directorships our nominee directors hold including the committees on which they serve. The GSSC reviews each director’s other public
company directorships and considers whether any such directorships would have an adverse impact on the director’s commitment to
the Company. The GSSC has raised no concerns with the Board members’ other public company directorships.
| Name | |
Other Public Company Directorships | |
Stock Exchange | |
Board/Committee Appointments |
| Ambrose, R. | |
Andlauer Healthcare Group Ltd. | |
TSX | |
Audit; Compensation; Nominating & Governance |
| Dielwart, J. | |
Crescent Point Energy Corp. | |
TSX | |
Reserves; Environmental, Health & Safety (Chair) |
| Fohrer, A. | |
PNM Resources, Inc. | |
NYSE | |
Audit and Ethics (Chair); Nominating & Governance |
| Folse, L. | |
None | |
- | |
- |
| Goldgut, H. | |
None | |
- | |
- |
| Kousinioris, J. | |
None | |
- | |
- |
| O’Flynn, T. | |
None | |
- | |
- |
| Park, B. | |
None | |
- | |
- |
| Pinney, B. | |
North American Construction Group Ltd. | |
TSX/NYSE | |
Lead Director; Audit (Chair); Human Resources & Compensation |
| | |
Sundial Growers Inc. | |
NASDAQ | |
Audit (Chair); Compensation; Nominating and Corporate Governance |
| Reid J. | |
CWC Energy Services Corp. | |
TSXV | |
Chair of the Board |
| | |
Inter Pipeline Ltd. | |
Not listed | |
Director |
| Sharman, S. | |
None | |
- | |
- |
| Slusser, S. | |
None | |
- | |
- |
| | TransAlta Corporation | 2022 Management Proxy Circular | 56 |
Board Expertise
Orientation and Continuing Education
Orientation
On May 4, 2021, Ms. Folse, Mr. O’Flynn, Mr. Reid
and Ms. Slusser were appointed to the Board as new directors. Prior to their appointments to the Board, they were given a clear indication
of the workload and time commitment required to serve on the Board. Individual meetings between Ms. Folse, Mr. O’Flynn, Mr. Reid and
Ms. Slusser were also scheduled with each executive officer in order to allow them to familiarize themselves with the management team
and to receive an orientation on TransAlta’s strategies, operations, generation technology, business development, legal, finance, investor
relations, and human resource capital and cost and efficiency programs. This orientation also included providing Ms. Folse, Mr. O’Flynn,
Mr. Reid and Ms. Slusser with the following:
| • | a director’s manual containing written
information about the directors’ duties and obligations, the Board, each Committee (including
the Charter for each Committee), the Company’s constating documents, the Directors’ Code
of Business Conduct, the Corporate Code of Conduct, the Supplier Code of Conduct, our Disclosure
Policy, our Insider Trading Policy, the Company’s other key policies, and a summary of our
business and operations; |
| • | access to materials and minutes
from recent Board and Committee meetings; and |
| • | at the beginning of the term, participation in all Committee
meetings to obtain an understanding of each Committee’s function, oversight responsibilities and the overall workings and responsibilities
of the Board. |
New directors are also provided with targeted
orientation sessions, carried out over several hours, to address multiple topics that are critical to understanding our business, including
with respect to the energy and utilities industry, strategy, operations, financial matters, legal compliance, risk management and assurance,
and various other topics. Depending on the circumstances at the particular time, new directors may also receive presentations and analyses
from our outside legal and financial advisors and other consultants on aspects of our business, strategy, strategic alternatives, financial
matters, legal and compliance, compensation programs and other matters.
Continuing Education
Our continuing education for directors seeks
to instruct directors regarding the nature and operation of the Company and includes the following:
| • | a comprehensive package of information prior to each Board and
Committee meeting; |
| • | presentations and tours of our principal operations on a periodic
basis, often in conjunction with Board meetings, to maintain directors’ familiarity with TransAlta’s operations, operational staff and
the communities in which we operate; |
| • | focused strategy sessions and deliberations, including presentations
from management and outside advisors, reviews of strategic alternatives, and testing of strategies and alternatives; |
| • | presentations from outside financial advisors, legal counsel
and other consultants; |
| • | access to an online secure site where management posts updates
relating to our operations and other topics of interest to the Board to keep the Board current and up to date on matters being dealt
with by management; |
| • | presentations by management of TransAlta to provide directors
with information pertinent to our business; |
| • | information sessions on topics suggested by management or directors; |
| • | the GSSC, with input from the Corporate Secretary, sets a schedule
for speakers and/or presentations from internal or external sources; |
| • | reports on the work of Board Committees following Committee
meetings; |
| • | full access to our senior management and employees; |
| • | professional development courses; for instance, our Board subscribes
to both the Institute of Corporate Directors and the National Association of Corporate Directors organizations, which promote the continuing
education of directors; and |
| • | encouraging directors to participate
in other available educational opportunities that would further their understanding of our
business and enhance their Board performance. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 57 |
In 2021, our directors received continuing education,
including presentations on the following topics:
| Date | |
Topic | |
Prepared/Hosted by | |
Attended by |
| March | |
Geopolitical Context Setting | |
Eurasia Group | |
All directors |
| August | |
Alberta Market | |
EDC Associates Ltd. | |
All directors |
| August | |
Organizational Culture | |
Spencer Stuart | |
All directors |
Prior to COVID-19 restrictions, the Board also
regularly held evening dinner sessions before the day of regularly scheduled Board meetings. Board dinners are treated as an opportunity
to accomplish a number of important governance objectives, including: building collegiality by meeting as directors in a less formal
atmosphere; meeting high-potential employees in order to advance the succession planning for the Company; and holding educational sessions
on important topics for the Company’s business and strategic direction. In 2021 the Company held one evening dinner session prior to
one regularly scheduled Board meeting.
Financial Literacy
An individual is defined as financially literate
if such individual can read and understand financial statements that are generally comparable in breadth and complexity of issues to
those found in our financial statements. The Board has determined that all directors are financially literate according to this definition.
As well, Ms. Park, Mr. Pinney, Mr. Fohrer and Mr. O’Flynn qualify as “audit committee financial experts” as defined by
the US Securities Exchange Act of 1934, as amended. This determination is based on an analysis of each director’s education, skills
and experience. Designation as an “audit committee financial expert” does not impose on such person any duties, obligations
or liabilities that are greater than the duties, obligations and liabilities imposed on a member of the Committee and/or Board in the
absence of such designation.
External Consultants and Other Third Parties
The Board and its Committees have the ability
to retain external consultants or other third parties at their own discretion. The HRC has retained Farient Advisors as independent compensation
consultants to advise it on the Company’s compensation plan. See “Compensation Discussion and Analysis — Independent Advice”.
Board Effectiveness
Board Evaluation
We have established an annual evaluation process
whereby our directors are provided with an opportunity to evaluate the Board, Board Committees, individual directors and the Chair’s
performance. Below is a summary of the processes for the annual evaluation:
| | TransAlta Corporation | 2022 Management Proxy Circular | 58 |
Review
(Frequency) |
|
By |
|
Action |
|
Outcome |
Full Board
(Annual)
|
|
All
Members of the Board |
|
Board members complete a detailed questionnaire that:
(a) provides the quantitative ratings in key areas; and (b) seeks subjective comment in each of those areas.
Responses are reviewed by the GSSC together with the
Chair of the Board.
Board members also meet one-on-one with the Chair of
the Board to discuss their views about the effectiveness of the Board.
The GSSC and Board reviews and considers any proposed
changes to the General Governance Guidelines for the Board. |
|
A summary report is prepared by the Chair of the Board.
The summary report is reported to the full Board by
the Board Chair during an in camera session.
Areas of improvement and objectives are identified and
monitored.
Suggestions are provided to the CEO to be communicated
to senior management for improvements in areas that will assist the Board in the discharge of its responsibilities. |
| |
|
|
|
|
|
|
| Chair
of the Board (Annual) |
|
All
Members of the Board |
|
Board members assess and comment on the Chair of the
Board’s performance measured against the position description.
Individual responses are received by the Chair of the
GSSC during one-on-one sessions with each member of the Board. |
|
A summary report is prepared by the Chair of the GSSC
and provided to the Chair of the Board and the full Board during an in camera session.
Before the Chair of the Board’s first term, the Chair
of the GSSC makes recommendation to the full Board with respect to the renewal of the term. |
| |
|
|
|
|
|
|
| Board
Committees (Annual) |
|
All
Members of the Board |
|
Board members complete a detailed questionnaire to evaluate
how well the Committees are operating and to make suggestions for improvement.
Responses are reviewed by the GSSC and Chair of the
Board.
Board members also meet one-on-one with the Chair of
the Board to discuss their views about the effectiveness of the Committees.
The GSSC and Board reviews and considers the proposed
changes to the Committee Charters. |
|
A summary report is prepared by the Chair of the GSSC.
The summary report is reported to the full Board by
the Chair of the GSSC during an in camera session.
The Chairs of the respective Committees are expected
to follow up on any matters raised in the assessment and take action, as appropriate.
|
| |
|
|
|
|
|
|
| Individual
Directors (Annual) |
|
Each
Director |
|
Each director formally meets with the Chair of the Board
to engage in a full and frank discussion of any and all issues either wishes to raise.
Each director is expected to be prepared to discuss
how the directors, individually and collectively, can operate more effectively. |
|
The Chair of the Board reports summary findings to the
full Board during an in camera session.
The Chair of the Board also meets one-on-one with each
director to discuss how the director can operate more effectively. |
Identifying New Candidates for the Board
The GSSC maintains an evergreen list of potential
Board candidates. Potential Board candidates are drawn from diverse sources, including referrals from and networks of our directors,
unsolicited inquiries by potential director candidates, references provided by our Shareholders and, in some cases, may be drawn from
third-party recruiting organizations. The GSSC reviews the list of candidates to identify top candidates and requests that the CEO, the
Chair of the Board or the Chair of the GSSC conduct an initial meeting with such candidates. As the next step, candidates deemed to be
most suited for the Board meet other members of the Board and, if deemed appropriate, other members of the executive team. This process
effectively provides for an orderly succession of directors by allowing the Board to plan Board appointments with Board retirements with
a view to maintaining an appropriate composition of skills and experience.
When recruiting new directors the GSSC considers
the merit of each individual, taking into account the vision and business strategy of the Company, as well as the diversity and skills
needed on the Board and having regard to the Company’s skills matrix, required competencies and the Board and Workforce Diversity Policy.
The evergreen list of potential Board candidates is regularly reviewed by the GSSC to ensure a diverse set of skills are represented.
The evergreen list includes at least 50% women to ensure equal representation. The GSSC also takes into account prospective candidates’
relative executive leadership, legal and entrepreneurial backgrounds, and experience with public company directorships, all of which
are valued but not determinative skills for any new Board members.
In addition, regard is also given to self-identified
gender, the designated groups, age, business experience, professional expertise, personal skills,
stakeholder perspectives and geographic background of any potential candidate. In 2021, the GSSC actively evaluated more than
49 candidates for the Board, of which 26 were women (approximately 53.1%) and seven visible minority candidates (approximately 14.3%).
All these factors were then considered with the goal of creating a diverse Board that together can provide insight, oversight
and foresight to benefit the Company.
| | TransAlta Corporation | 2022 Management Proxy Circular | 59 |
Nomination Rights
Pursuant to the Investment Agreement, for so
long as Brookfield holds the exchangeable securities, Brookfield is entitled to designate two (2) nominees for election to the Board
at each annual meeting of shareholders. Each nominee must be (i) an individual acceptable to the GSSC, acting reasonably and applying
the Company’s skills matrix and governance guidelines, and (ii) meet the requirements of and be eligible to serve as a director
of the Company pursuant to applicable law. Messrs. Reid and Goldgut are the Brookfield nominees to the Board.
The Company is required to use commercially reasonable
efforts to ensure that the Brookfield nominees are elected to the Board at each annual shareholder meeting, including soliciting proxies
in support of their election and taking the same actions taken by the Company to ensure the election of the other nominees selected by
the Board for election to the Board. Each Brookfield nominee must be an individual of high quality and integrity who has significant
experience and expertise in business or that is applicable to business, served in a senior executive, leadership or entrepreneurial position,
have broad exposure to and understanding of the Canadian business community, skills for directing the management of a company, and motivation
and availability, in each case, to the extent requisite for a business of the complexity, size and scale of the business of the Company
and on a basis consistent with the highest standards for directors of similarly situated Canadian publicly listed companies.
If either of Brookfield’s nominees to the
Board are not elected at the Meeting or any subsequent meeting of the Shareholders, Brookfield’s obligation to increase and maintain
its holding of common shares at 9% and its standstill, voting and lock-up obligations under the Investment Agreement may be suspended
until the date that both of its nominees are elected or appointed to the Board. As previously disclosed by the Company, the Investment
Agreement includes standstill, voting and lock-up obligations that will, subject to certain exceptions, be in effect until May 1, 2022.
Among other things, Brookfield has agreed until May 1, 2022, that it will vote in favour of each director nominated by the Board; vote
against any shareholder nominations for directors that are not approved by the Board; vote against any proposal or resolution to remove
any Board member; and vote in accordance with any recommendations by the Board on all other proposals.
Shareholder Engagement
The Board believes that it is important to have
regular and constructive engagement directly with its Shareholders. This includes allowing, encouraging and facilitating shareholders
to express their views on strategic, governance and other matters directly to the Board. The Board encourages Shareholder participation
at the Meeting, where the Chair of the Board will be available to respond to Shareholder questions. Between annual meetings, the Company
supports an open and transparent process for Shareholders to contact the Board, including the Chairs of the Board Committees, through
the office of the Corporate Secretary or at the email listed below. It is the practice of the Company for the Chair of the Board and
the Chair of one of the standing Committees to meet with large institutional shareholders on an annual basis. Throughout 2021, representatives
of the Board and senior management (including the CEO) engaged extensively with the Company’s significant Shareholders. In 2021, members
of the Board met directly with shareholders representing approximately 34.7% of the Company’s total issued and outstanding common
shares.
Appropriate topics for discussion between the
Board and Shareholders may include oversight of the Company’s strategy, corporate governance, risk management oversight, executive performance
or compensation, financial oversight, shareholder proposals, or Board or Committee composition, performance, diversity, tenure and succession
planning. The Board Chair, with the assistance of the Corporate Secretary, determines which Shareholder engagement requests are properly
addressed by the Board; typically, topics that are operational in nature or relate to financial results, transactions or Company performance
will be referred by the Board to management. In addition to responding to Shareholder requests for meetings or inquiries, non-executive
directors also engage in proactive Shareholder engagement events, including one-on-one in-person or telephone meetings with our significant
Shareholders, roundtable discussions, roadshows, investor days, virtual meetings and other forums.
The Company’s Shareholder Engagement Policy
is subject to applicable law and the Company’s disclosure policies, which prohibit the selective disclosure of undisclosed material facts
or material changes. The Shareholder Engagement Policy is intended to promote and facilitate an interchange of views about governance
and other corporate matters that are within the public domain. The GSSC oversees this policy and reviews it annually to ensure that it
is effective in achieving its objectives and continues to be representative of sound corporate governance practices. The Shareholder
Engagement Policy can be found at the Company’s website at www.transalta.com/about-us/governance/shareholder-engagement-policy.
The Board will endeavour to respond to all appropriate
correspondence in a timely manner. On a quarterly basis, the Corporate Secretary also reports to the GSSC with respect to all communications
sent to the Board.
| | TransAlta Corporation | 2022 Management Proxy Circular | 60 |
Shareholders may communicate with the Board,
care of the Corporate Secretary, either by mail addressed to the TransAlta Board of Directors (marking the envelope “Confidential
— Board-Shareholder Engagement”) or email (marking the subject line as “Confidential — Board-Shareholder Engagement”)
as follows:
Corporate Secretary
TransAlta Corporation
110 – 12th Avenue SW
Box 1900, Station “M”
Calgary, Alberta T2P 2M1
Or via email to: corporate secretary@transalta.com
Shareholder engagement requests sent to the Board
will be reviewed by our Corporate Secretary. Shareholders, and other stakeholders, are also encouraged to contact us through our Ethics
Helpline at 1.855.374.3801 (Canada/US) or 1.800.40.5308 (Australia) or by emailing the Ethics Committee (composed of members of management)
at ethics_helpline@transalta.com.
Other Information
Loans to Directors and Officers
As a general rule, the Company does not provide
loans to its directors and officers and there were no such loans advanced or outstanding during the 2021 fiscal year. The Board must
approve any loans that may be made to directors and officers.
As of December 31, 2021, no indebtedness was
due from any associate of any director or executive officer of the Company.
Directors and Officers Liability Insurance
The Company has purchased, at its expense, directors’
and officers’ liability insurance policies to provide insurance against possible liabilities incurred by its directors and officers in
their capacity as directors and officers of the Company and its subsidiaries. The premium for these policies for the period from December
31, 2020, to December 31, 2021, is US$2,091,045. The policies provide coverage of up to US$150
million per occurrence to a maximum of US$150 million per annum. There is no deductible
for directors and officers and a US$3 million deductible for each claim made by the Company.
The insurance applies in circumstances where the Company may not indemnify its directors and officers for their acts or omissions.
Interests of Informed Persons in Material Transactions
Except as disclosed below and elsewhere in this
Circular, there were no material interests, direct or indirect, of any director or executive officer of the Company, any proposed director
of the Company, any other “informed person” (as such term is defined in National Instrument 51-102 — Continuous Disclosure
Obligations), any person who, to the knowledge of the directors or officers of the Company, beneficially owns or exercises control
or direction over securities carrying more than 10% of the voting rights attached to any class of outstanding voting securities of the
Company, or any associate or affiliate of any of the foregoing, in any transaction since the commencement of the Company’s most recently
completed financial year or in any proposed transaction that has materially affected or would materially affect the Company or any of
its subsidiaries.
Pursuant to the Investment Agreement between
the Company and an affiliate of Brookfield, for so long as Brookfield owns the exchangeable securities issued to it under the Brookfield
Investment, it has the right to nominate two members for election to the TransAlta Board at each annual meeting of Shareholders. Messrs.
Goldgut and Reid are Brookfield’s current nominees and have been recommended to Shareholders for election at the Meeting. In connection
with the Investment Agreement, Brookfield or its affiliates received or are entitled to receive certain funding fees, management fees
and interest and dividends relating to the Brookfield Investment. See “Business of the Meeting – Election of Directors”
elsewhere in this Proxy Circular for additional information about Messrs. Goldgut and Reid, who are also current or former directors
and/or officers of Brookfield and/or its affiliated entities. Messrs. Goldgut and Reid were not directors of the Company at the time
the Brookfield Investment was approved and entered into by the Company.
For further details concerning the Brookfield
Investment and Brookfield’s nomination, voting, standstill and lock-up rights and restrictions, and other key terms and provisions
of the Investment, reference is made to the Company’s material change report dated March 26, 2019, filed under the Company’s
profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. A complete copy of the Investment Agreement, together with
copies of the exchangeable debenture issued to Brookfield on May 1, 2019, the registration rights agreement entered into with Brookfield
in respect of common shares held in TransAlta, and the exchange and option agreement with Brookfield governing the terms of the exchange
of the exchangeable securities issued under the Investment, are also available on SEDAR and EDGAR.
Interest of Certain Persons in Matters to be Acted Upon
Except as otherwise disclosed above under “Interests
of Informed Persons in Material Transactions” and elsewhere in this Proxy Circular, no person who has been a director or officer
of the Company at any time since the beginning of the 2021 fiscal year, no proposed nominee for election as a director of the Company,
and no associate or affiliate of any of the foregoing, has any material interest, direct or indirect, by way of beneficial ownership
of securities or otherwise, in any matter to be acted upon at the Meeting.
| | TransAlta Corporation | 2022 Management Proxy Circular | 61 |
Report of the Audit, Finance and Risk Committee and Committee Responsibilities
Members
The AFRC is comprised of independent
directors in accordance with National Instrument 52-110 — Audit Committees. All members of the AFRC are “financially
literate” as required by the Canadian Securities Administrators and the NYSE. Ms. Park, Mr. Pinney and Mr. O’Flynn are “audit
committee financial experts” as defined by the US Securities Exchange Act of 1934, as amended. |
|
 |
 |
 |
 |
| |
Beverlee Park (Chair) |
Alan Fohrer |
Thomas
O’Flynn |
Bryan
Pinney |
Mandate
The AFRC provides assistance to
the Board in fulfilling its oversight responsibilities with respect to the integrity of the Company’s financial statements and financial
reporting process, the Company’s systems of internal financial controls and disclosure controls established by management, as well as
the Company’s risk identification and assessment process conducted by management. The full text of the AFRC’s Charter and more information
relating to the AFRC is available on TransAlta’s website at www.transalta.com/about-us/governance/board-committees or at www.sedar.com
as an Appendix to the Company’s Annual Information Form. |
In fulfilling its mandate in 2021, the AFRC completed
the following:
Financial Reporting
| · | reviewed and approved or recommended to the Board, in case of
the annual statements, the Company’s quarterly and annual consolidated financial statements, including the notes thereto, and the related
management’s discussion and analysis; |
| · | received regular updates from management with respect to any
changes in accounting principles, practices or policies and discussed with management and the external auditors their applicability and
impact on the Company’s business; |
| · | received regular updates from management with respect to its
disclosure controls and procedures and the effectiveness of these controls; and |
| · | reviewed the Company’s annual information
form and all other public disclosure containing financial information for the year ended
December 31, 2021. |
Risk Management and Regulatory Compliance
| · | amended the mandate of the AFRC in order to include a review
of material transactions involving related parties; |
| · | received updates on and oversaw the Company’s assessment and
mitigation of cybersecurity threats; |
| · | received quarterly updates on and oversaw the Company’s risk
identification, mitigation and management assessment processes based on the Company’s Enterprise Risk Management framework; and |
| · | received quarterly detailed reports
and analysis on the Company’s risk profile, risk assessment, hedge, trading risk metrics,
developing risks forecast and programs/policies put in place to mitigate or address such
risks. |
Financial Planning
| · | received tax updates and reviewed the long-range tax and financing
plan; |
| · | reviewed reports from the external auditors and the Internal
Auditor relating to the adequacy of the Company’s financial risk management practices, as well as management’s responses; |
| · | reviewed and recommended to the Board changes to the Company’s
policies with respect to financial and commodity exposure management; |
| · | received quarterly updates on the Company’s financial and commodity
exposure management activities; |
| · | received quarterly updates with respect to legal and regulatory
compliance matters that may have a material impact on the Company’s financial statements; |
| · | reviewed the Company’s credit facility amendments, which included
a sustainability metrics incorporating the Company’s GHG and gender diversity targets; and |
| · | reviewed the financial performance
of the Company’s pension plans. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 62 |
External Auditors
| · | reviewed the performance and qualifications
of the external auditors and recommended to the Board their reappointment for Shareholder
approval; |
| · | reviewed and discussed with the
external auditors the accounting policies adopted by management, the estimates made, and
the reasonableness of the assessments made by management; |
| · | reviewed the independence of the
external auditors, based on the auditors’ disclosure of their relationship with the Company,
and determined they were independent; |
| · | obtained and reviewed with the external
auditors their report with respect to their internal quality-control procedures, any material
issues raised by the review or recent peer review and inquired on whether there were any
investigations by governmental or professional authorities within the last five years, and
determined that no such matters existed that could impact their ability to act as independent
external auditors; |
| · | reviewed and approved the fees payable
to the external auditors; |
| · | reviewed and approved the overall
scope and plans of the annual audit with the external auditors and management; |
| · | reviewed and approved non-prohibited
services to be provided by the external auditors; and |
| · | met privately, without any members of management present, with
the external auditors to discuss the scope of their work, their relationship with management and internal audit and other issues that
the external auditors wished to raise at each AFRC meeting and at each regularly scheduled executive session. |
Internal Auditors
| · | reviewed the mandate, independence, qualifications and resources
of the Internal Auditor; |
| · | reviewed and approved the annual work plan of the Internal Audit
department; |
| · | received regular quarterly updates of audits performed, the
results of each audit and the plans in place to address any remedial work needed; |
| · | engaged internal audit to undertake independent reviews of the
business to provide clarity on compliance and best practices; and |
| · | met privately, without any members
of management present, with the Internal Auditor in order to address processes, management
support in the fulfillment of the department’s responsibilities, and any other matters that
arose. |
In addition, during 2021 the AFRC:
| · | met regularly with external auditors; the Internal Auditor;
the CEO; the CFO; the Vice President and Corporate Controller; the Executive Vice President, Legal, Commercial and External Affairs;
the Vice President and Corporate Secretary; and other members of management, as required; |
| · | met in camera, without management present, at the conclusion
of each stand-alone AFRC meeting; |
| · | reviewed the changes made to the Company’s trade compliance
program; |
| · | reviewed and received quarterly updates concerning any complaints
relating to accounting, internal accounting controls, auditing or financial reporting matters under the Whistleblower Policy and oversaw
their investigation and resolution in coordination with the Company’s ethics investigations committee; and |
| · | received quarterly reports about
any complaints submitted under the Corporate Code of Conduct, including any complaints under
the Ethics Helpline. |
The AFRC has reviewed its mandate and is satisfied
that it met the terms of its Charter in 2021.
| Beverlee
Park (Chair) |
Alan
Fohrer |
Thomas
O’Flynn |
Bryan
Pinney |
| | TransAlta Corporation | 2022 Management Proxy Circular | 63 |
Report of the Governance, Safety and Sustainability Committee and
Committee Responsibilities
Members
The GSSC is comprised of independent
directors. Each member brings to the Committee experience and knowledge relevant to the Committee’s responsibilities and accountabilities,
including experience in corporate governance, health and safety, environment and sustainability, industry experience, finance and
business judgment.
|
|
 |
 |
 |
 |
| |
Rona
Ambrose
(Chair) |
Alan
Fohrer |
Laura
Folse |
Sandra
Sharman |
Mandate
The GSSC is responsible for developing
and recommending to the Board a set of corporate governance principles applicable to the Company and to monitoring the compliance
with these principles. The GSSC is also responsible for board recruitment, succession planning and for the nomination of directors
to the Board and its Committees. In addition, the GSSC assists the Board in fulfilling its oversight responsibilities with respect
to the Company’s monitoring of environmental, health and safety regulations and public policy changes and the establishment and adherence
to environmental, health and safety practices, procedures and policies.
The Charter of the GSSC is available on
TransAlta’s website at www.transalta.com/investor-centre/governance. |
In fulfilling its mandate in 2021, the GSSC completed
the following:
Corporate Governance
| · | reviewed the size and composition of the Board, the retirement
dates for each director, and the directors’ skills matrix to assess any skills gaps and identify the complement of core competencies
needed on the Board to maximize oversight of the future and strategic direction of the Company; |
| · | evaluated the size and composition of the Board Committees to
provide for staffing of each Committee with the appropriate mix of skills and experience to maximize effective decision-making; |
| · | identified, assessed and recommended the nominees to stand for
election as directors at the Meeting; |
| · | reviewed and recommended amendments as required to the Company’s
General Governance Guidelines for the Board; |
| · | reviewed and recommended amendments to the Charters of each
Committee, which were approved by the Board; |
| · | reviewed the written Corporate Code of Conduct and Code of Business
Conduct for Directors; |
| · | reviewed and assessed the terms of reference of the Chair of
the Board; |
| · | reviewed independent director share ownership requirements; |
| · | reviewed the Shareholder Engagement Policy and Workplace Diversity
Policy; |
| · | reviewed sponsorships, donations and political contributions; |
| · | reviewed the market competitiveness of directors’ compensation; |
| · | performed an evaluation of the Board, its Committees and the
individual directors and held a discussion in camera at the Board level on the results of the anonymous evaluations, also addressing
matters for improvement and change where applicable; and |
| · | reviewed the directors’ and officers’
insurance program. |
Environment, Health and Safety (“EH&S”)
| · | received regular reports from management regarding environmental,
health and safety compliance, trends and TransAlta’s responses; |
| · | received reports and briefings on management’s initiatives with
respect to changes in climate change legislation, policy developments and other draft initiatives, and the potential impact such initiatives
may have on the Company’s operations in Canada, the US and Australia; |
| · | assessed the impact of GHG policies and other legislative initiatives
on the Company’s business; |
| · | reviewed the Company’s community investment initiatives; |
| · | reviewed with management the EH&S policies of the Company; |
| · | received updates on dam safety; |
| · | reviewed TransAlta’s Emergency Response Plan; |
| · | received regular reports from management on the near-miss reporting
program and discussed with management ways to improve the EH&S processes and practices; and |
| · | reviewed the effectiveness of TransAlta’s
response to EH&S issues and any new initiatives put in place to further improve the Company’s
EH&S culture. |
Sustainability
| · | received and recommended for approval the annual ESG report
from management regarding TransAlta’s environmental, social and governance objectives. |
In addition, during 2021 the GSSC met in camera,
without management present, at the conclusion of each GSSC meeting. The GSSC has reviewed its mandate and is satisfied that it met the
terms of its Charter in 2021.
| Rona
Ambrose (Chair) |
Alan
Fohrer |
Laura
Folse |
Sandra
Sharman |
| | TransAlta Corporation | 2022 Management Proxy Circular | 64 |
Report of the Human Resources Committee and Committee Responsibilities
Members
All members of the HRC are independent.
Each member brings to the Committee experience and knowledge relevant to the Committee’s responsibilities and accountabilities, including
experience in human resources, executive compensation, compensation risk management, corporate governance, industry, finance and business
judgment. |
|
 |
|
 |
|
 |
| |
Bryan
Pinney
(Chair)
|
Rona
Ambrose |
Beverlee
Park |
Sandra
Sharman
|
Sarah
Slusser
|
Mandate
The HRC is empowered by the Board
to oversee, review and approve the key compensation, human resources and pension policies and plans of TransAlta that are intended
to attract, recruit, retain and motivate employees of the Company. The HRC also makes recommendations to the Board regarding the
compensation of the Company’s executive officers, including the review and adoption of equity-based incentive compensation plans
and pension plans, the adoption of human resources policies that support human rights and ethical conduct, oversight of compensation
risk management and assessment processes, and the review and approval of executive management succession and development plans.
The Charter of the HRC is available
on TransAlta’s website at www.transalta.com/investor-centre/governance. |
In fulfilling its mandate in 2021, the HRC completed
the following:
Executive Compensation
| · | reviewed and approved the annual incentive targets and long-term
incentive performance metrics and targets, reviewed the performance of the CEO and received and reviewed the CEO’s evaluation of the
other executives’ performance over the last year, and reviewed the Company’s say-on-pay policy; |
| · | reviewed the executive profiles and responsibilities; |
| · | reviewed and amended its Charter; |
| · | assessed executive and management succession; |
| · | approved the comparator group and reviewed the variable pay
metrics and the executive assessment process and share ownership guidelines; |
| · | discussed compensation governance; |
| · | reviewed assessments for leaders across the Company; |
| · | reviewed the incentive metrics and modifications to the 2021
incentive program, and recommended to the Board the 2021 executive goals, and the 2021 CEO compensation; and |
| · | reviewed and approved the 2021 work
plan. |
Human Resources and Pensions
| · | reviewed, approved and reported to the Board on the Company’s
human resources policies, practices and structures; |
| · | reviewed the pension, benefits and similar benefits and overall
governance of the Company’s pension and similar plans; and |
| · | together with the AFRC, reviewed
and recommended to the Board the Company’s annual pension report. |
In 2021, the HRC also:
| · | held management succession discussions; |
| · | conducted annual salary reviews for executive officers; |
| · | reviewed the Workplace Diversity Policy; |
| · | reviewed the CEO’s position description; |
| · | continued to review the impacts of COVID-19 and discussed remote
work arrangements; and |
| · | together with management, reviewed
and assessed the Company’s compensation-related risks and mitigation and management strategies. |
In addition, during 2021 the HRC met in camera,
without management present, at the conclusion of each HRC meeting.
The HRC has reviewed its mandate and is satisfied
that it met the terms of its Charter in 2021.
| Bryan
Pinney (Chair) |
Rona
Ambrose |
Beverlee
Park |
Sandra
Sharman |
Sarah
Slusser |
| | TransAlta Corporation | 2022 Management Proxy Circular | 65 |
Report of the Investment Performance Committee and Committee Responsibilities
Members
The IPC is comprised of independent
directors. Each member brings to the Committee experience and knowledge relevant to the Committee’s responsibilities and accountabilities,
including experience in capital allocation, industry expertise, project development, construction, finance and business judgment. |
|
|
 |
 |
 |
|
| |
Laura
Folse
(Chair) |
Harry
Goldgut |
Thomas
O’Flynn |
James
Reid |
Sarah
Slusser |
| |
|
|
|
|
|
Mandate
The IPC assists the Board by providing
oversight of management’s investment conclusions and of the execution of major Board-approved capital expenditure projects
that are in furtherance of the Company’s strategic plans.
The
full text of the IPC’s Charter and more information relating to the IPC is available on TransAlta’s website at www.transalta.com/investor-centre/governance. |
The IPC was formed in 2019 primarily for the
purpose of assisting the Board in its oversight of the transformational strategy of the Company to become a leading clean energy company,
primarily through converting the Company’s coal generating units to natural gas generation by 2025, as well as to support the Board
in its oversight of the other strategic growth priorities of the Company relating to renewables and on-site generation.
In fulfilling its mandate in 2021, the IPC completed
the following:
| · | reviewed the Company’s transition to gas strategy; |
| · | reviewed the status of coal-to-gas conversions; |
| · | reviewed and recommended to the Board the retirements of thermal
units, including the suspension of the Sundance Unit 5 repowering project; |
| · | reviewed and amended its Charter; |
| · | reviewed and recommended to the Board with respect to acquisition
opportunities, including the North Carolina solar project; |
| · | reviewed key elements relating to the Company’s major
capital projects, including the Garden Plain and White Rock wind projects; |
| · | reviewed post-investment returns on assets of prior major capital
projects, including the coal-to-gas conversion projects and Skookumchuck wind farm; and |
| · | reviewed and evaluated different
investment opportunities. |
In addition, during 2021 the IPC:
| · | met in camera, without management present, at the conclusion
of each IPC meeting. |
The IPC has reviewed its mandate and is satisfied
that it met the terms of its Charter in 2021.
| Laura
Folse (Chair) |
Harry
Goldgut |
Thomas
O’Flynn |
James
Reid |
Sarah
Slusser |
| | TransAlta Corporation | 2022 Management Proxy Circular | 66 |
Director Compensation
Report on Director Compensation
Philosophy and Approach
The Board is responsible for developing, implementing
and overseeing the directors’ compensation program and has delegated to the GSSC responsibility for evaluating and making recommendations
to the Board regarding director compensation. The compensation practices for directors take into consideration:
| · | the Company’s strategic plans and priorities; |
| · | the complexity of the industry and size of the business; |
| · | the retention and attraction of qualified individuals to serve
as directors on the Board; |
| · | the provision of competitive compensation; and |
| · | the importance we place on aligning
directors’ compensation with the interests of Shareholders. |
Director compensation does not include retirement
benefits, change of control or severance provisions, health-care coverage, charitable donations, vehicles, club memberships, pensions,
or other such perquisites. In addition, non-management directors are not eligible to participate in the long-term incentive plan (consisting
of restricted share units and performance share units) or the stock option plan.
The GSSC annually reviews the market competitiveness
of directors’ compensation against companies of similar size and scope in Canada. It also considers the time commitment and experience
required of members to serve on our Board and to ensure it attracts and retains qualified directors. The Company benchmarks its compensation
to the median of Canadian companies of our peer group, which generally are of similar size from a revenue, asset and market capitalization
basis.
Components of Compensation for 2021
| Retainers | |
Amount(1) | |
| Board Member Annual Retainer(2) and Meeting Fees | |
| | |
| Chair of the Board | |
$ | 330,000 | |
| Board Member | |
$ | 160,000 | |
| Fee for each Board meeting in excess of 10 | |
$ | 1,500 | |
| Committee Chair and Member(3) Annual Retainer Fees | |
| | |
| Audit, Finance and Risk Committee (Chair) | |
$ | 25,000 | |
| Human Resources Committee (Chair) | |
$ | 25,000 | |
| Governance, Safety and Sustainability Committee (Chair) | |
$ | 15,000 | |
| Investment Performance Committee (Chair) | |
$ | 15,000 | |
| Travel Fees | |
| | |
| If travelling more than 1,000 kilometres round trip | |
$ | 1,500 | |
| If travelling more than 7,500 kilometres round trip | |
$ | 3,000 | |
Notes:
| (1) | The amounts are payable in Canadian dollars for directors that
reside in Canada and payable in US dollars for directors that reside outside of Canada. |
| (2) | A director can elect to receive one-half of the annual retainer
in cash, deferred share units or common shares and one-half in deferred share units or common shares. |
| (3) | Standing committee members do not receive an annual retainer. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 67 |
Following a review of our peers on November 1,
2021, the Board adopted the following Board compensation effective January 1, 2022:
Components of Compensation for 2022:
| Retainers | |
Amount(1) | |
| Board Member Annual Retainer(2) and Meeting Fees | |
| | |
| Chair of the Board | |
$ | 330,000 | |
| Board Member | |
$ | 195,000 | |
| Fee for each Board meeting in excess of 10 | |
$ | 1,750 | |
| Committee Chair and Member(3) Annual Retainer Fees | |
| | |
| Audit, Finance and Risk Committee (Chair) | |
$ | 25,000 | |
| Human Resources Committee (Chair) | |
$ | 25,000 | |
| Governance, Safety and Sustainability Committee (Chair) | |
$ | 25,000 | |
| Investment Performance Committee (Chair) | |
$ | 25,000 | |
| Travel Fees | |
| | |
| If travelling more than 1,000 kilometres round trip | |
$ | 1,500 | |
| If travelling more than 7,500 kilometres round trip | |
$ | 3,000 | |
Notes:
| (1) | All amounts are in payable in Canadian dollars for directors
residing in Canada, and the equivalent amount will be converted to US dollars using the foreign exchange mid-rate on the 13th day (or
previous business day) of the last month in each quarter for directors residing in the US. |
| (2) | A director can elect to receive one-half of the annual retainer
in cash, deferred share units or common shares and one-half in deferred share units or common shares. |
| (3) | Committee members do not receive an annual retainer. |
Deferred Share Units
Each deferred share unit (“DSU”) is
a notional share that has the same value as one TransAlta common share. DSUs may not be redeemed until the director leaves the Board.
As a result, directors maintain an ongoing equity stake in the Company throughout their service on the Board.
DSUs are allocated to each director’s account
on the 16th day of the last month of each compensation quarter (the “Accrual Date”), being March, June, September and December,
based on the volume-weighted average price of a TransAlta common share on the TSX for the five trading days preceding the Accrual Date.
The DSU account of each director is also credited with DSUs equivalent to cash dividends declared based on the market value preceding
the date dividends are paid on our common shares.
Following retirement from the Board, the retiring
director will receive a cash amount equal to the number of DSUs held in the director’s account multiplied by the then market value, less
applicable taxes.
Share Ownership Requirements of Directors
The Board believes that directors’ compensation
should align with Shareholders’ interests. As a result, a portion of each director’s annual retainer must be paid in common shares of
TransAlta (which are purchased on behalf of the director in the open market) or in DSUs, as described above. Each independent director
is required to acquire and hold a minimum value of three times the annual retainer within five years of joining the Board. New directors
are also required to acquire and hold the equivalent of one times the annual retainer within two years of joining the Board. Following
an increase in director compensation, a director will have two years to acquire and hold the equivalent of one times the amount of the
increase to the annual retainer and five years to acquire and hold a minimum value of three times the amount of such increase.
| | TransAlta Corporation | 2022 Management Proxy Circular | 68 |
Shareholdings of Directors at December 31, 2021:
|
Director and
Year Appointed |
|
Year |
|
|
Total Shares
and Share Units(1) |
|
|
Change Year
Over Year |
|
|
Value(2) |
|
|
Equity at Risk
Multiple of 2021
Annual Retainer |
|
|
Ownership
Requirement
Met(3) |
| R. Ambrose — 2017 |
|
|
2021 |
|
|
|
60,500 |
|
|
|
7,214 |
|
|
$ |
827,640 |
|
|
|
5.17x |
|
|
Yes |
| |
|
|
2020 |
|
|
|
53,286 |
|
|
|
|
|
|
$ |
489,165 |
|
|
|
3.06x |
|
|
|
| J. Dielwart — 2014 |
|
|
2021 |
|
|
|
155,282 |
|
|
|
15,361 |
|
|
$ |
2,124,258 |
|
|
|
6.43x |
|
|
Yes(4) |
| |
|
|
2020 |
|
|
|
139,921 |
|
|
|
|
|
|
$ |
1,284,475 |
|
|
|
3.89x |
|
|
|
| A. Fohrer — 2013 |
|
|
2021 |
|
|
|
126,750 |
|
|
|
9,873 |
|
|
$ |
1,733,940 |
|
|
|
8.67x |
|
|
Yes(5) |
| |
|
|
2020 |
|
|
|
116,877 |
|
|
|
|
|
|
$ |
1,072,931 |
|
|
|
5.36x |
|
|
|
| L. Folse — 2021 |
|
|
2021 |
|
|
|
5,215 |
|
|
|
5,215 |
|
|
$ |
71,341 |
|
|
|
0.36x |
|
|
On Track(5)(6) |
| |
|
|
2020 |
|
|
|
— |
|
|
|
|
|
|
$ |
— |
|
|
|
— |
|
|
|
| H. Goldgut — 2019 |
|
|
2021 |
|
|
|
91,740 |
(7) |
|
|
26,161 |
|
|
$ |
1,255,003 |
|
|
|
7.84x |
|
|
Yes(8) |
| |
|
|
2020 |
|
|
|
65,579 |
(7) |
|
|
|
|
|
$ |
602,015 |
|
|
|
3.76x |
|
|
|
| J. Kousinioris — 2021(9) |
|
|
2021 |
|
|
|
319,907 |
|
|
|
63,085 |
|
|
$ |
4,376,328 |
|
|
|
N/A |
|
|
Yes(10) |
| |
|
|
2020 |
|
|
|
256,822 |
|
|
|
|
|
|
$ |
2,357,626 |
|
|
|
N/A |
|
|
|
| T. O’Flynn — 2021 |
|
|
2021 |
|
|
|
10,386 |
|
|
|
10,386 |
|
|
$ |
142,080 |
|
|
|
0.71x |
|
|
On Track(5)(6) |
| |
|
|
2020 |
|
|
|
— |
|
|
|
|
|
|
$ |
— |
|
|
|
— |
|
|
|
| B. Park — 2015 |
|
|
2021 |
|
|
|
117,555 |
|
|
|
7,931 |
|
|
$ |
1,608,152 |
|
|
|
10.05x |
|
|
Yes |
| |
|
|
2020 |
|
|
|
109,624 |
|
|
|
|
|
|
$ |
1,006,348 |
|
|
|
6.29x |
|
|
|
| B. Pinney — 2018 |
|
|
2021 |
|
|
|
90,060 |
|
|
|
13,944 |
|
|
$ |
1,232,021 |
|
|
|
7.70x |
|
|
Yes |
| |
|
|
2020 |
|
|
|
76,116 |
|
|
|
|
|
|
$ |
698,984 |
|
|
|
3.12x |
|
|
|
| J. Reid — 2021 |
|
|
2021 |
|
|
|
91,740 |
(7) |
|
|
91,740 |
|
|
$ |
1,255,003 |
|
|
|
7.84x |
|
|
Yes(8) |
| |
|
|
2020 |
|
|
|
— |
|
|
|
|
|
|
$ |
— |
|
|
|
— |
|
|
|
| S. Sharman — 2020 |
|
|
2021 |
|
|
|
26,441 |
|
|
|
13,297 |
|
|
$ |
361,713 |
|
|
|
2.26x |
|
|
On Track(11) |
| |
|
|
2020 |
|
|
|
13,144 |
|
|
|
|
|
|
$ |
120,662 |
|
|
|
0.75x |
|
|
|
| S. Slusser — 2021 |
|
|
2021 |
|
|
|
5,215 |
|
|
|
5,215 |
|
|
$ |
71,341 |
|
|
|
0.36x |
|
|
On Track(5)(6) |
| |
|
|
2020 |
|
|
|
— |
|
|
|
|
|
|
$ |
— |
|
|
|
— |
|
|
|
Notes:
| (1) | Includes DSUs granted and DSUs
credited in lieu of reinvested dividends. See “Report on Director Compensation Components
of Compensation for 2021 – Deferred Share Units” for further information. |
| (2) | The 2020 value is based on the weighted average closing price
of TransAlta common shares on the TSX for the 20 trading days prior to and including December 31, 2020, of $9.18 and the 2021 value is
based on the weighted average closing price of TransAlta common shares on the TSX for the 20 trading days prior to and including December
31, 2021, of $13.68. |
| (3) | Pursuant to the External Directors Share Ownership Requirements,
as of December 31, 2021, independent directors are required to acquire and hold a minimum value of three times the directors’ annual
retainer fee within five years from the date they joined the Board to meet the independent directors share ownership requirement. New
directors are required to hold the equivalent of their annual retainer within two years of joining the Board or from the date of any
increase in compensation, to meet the independent directors’ share ownership requirement. |
| (4) | Mr. Dielwart was appointed Chair of the Board on April 21, 2020,
at which time his annual retainer increased to $330,000. Notwithstanding he has currently met the requirement, Mr. Dielwart has until
April 21, 2025, to hold shares equal to three times his annual retainer ($990,000). |
| (5) | For purposes of assessing compliance with the requirements for
US directors, the annual retainer is the actual amount paid to a director. |
| (6) | Ms. Slusser, Ms. Folse and Mr. O’Flynn were appointed to the
Board on May 4, 2021, and have until May 4, 2023, to hold their annual retainer amount ($195,000) in shares and have until May 4, 2026,
to hold shares equal to three times their annual retainer ($585,000). |
| (7) | Mr. Goldgut and Mr. Reid are nominees of Brookfield and both
elected to receive common shares for 100% of their director compensation and have directed the Company to register such common shares
to an entity affiliated with Brookfield. To the extent Mr. Goldgut or Mr. Reid are deemed to be the beneficial owner of any such shares,
each of Mr. Goldgut and Mr. Reid expressly disclaim beneficial ownership thereof. In total, 91,740 common shares were registered to an
affiliate of Brookfield as of December 31, 2021, pursuant to the directions of Brookfield nominee directors. |
| (8) | Mr. Goldgut and Mr. Reid are exempt from directly satisfying
the share ownership requirement for so long as they are Brookfield’s nominees on the Board and so long as Brookfield is in compliance
with its obligations under the Investment Agreement. |
| (9) | Mr. Kousinioris’ Total Shares
and Share Units are comprised of “eligible shares” for purposes of the executive
share ownership policy, which consist of common shares, RSUs and ODSUs (as described under
“Compensation Discussion and Analysis — NEO Share Ownership”). As at December
31, 2021, he held 139,316 RSUs and no ODSUs. In addition, as at December 31, 2021, Mr. Kousinioris
held 268,032 PSUs and 637,505 options to acquire common shares. See “Compensation Discussion
and Analysis — Incentive Plan Awards.” |
| (10) | Mr. Kousinioris is the President
and CEO of TransAlta and has been a Board member since April 1, 2021. Mr. Kousinioris is
required to hold five times his base salary in accordance with the Company’s executive share
ownership policy. |
| (11) | Ms. Sharman was appointed to the Board on April 21, 2020, and
has until April 21, 2022, to hold her annual retainer amount ($160,000) in shares and has until April 21, 2025, to hold shares equal
to three times her annual retainer ($480,000). Following the increase in the annual retainer, she has until January 1, 2024, to hold
an incremental amount equal to the increase to the annual retainer of $35,000, and has until January 1, 2027, to hold an incremental
amount of $105,000, which is equal to three times the increase to the annual retainer. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 69 |
Summary of Directors’ Compensation for the Fiscal Year 2021
Consistent with director compensation best practices,
a flat fee compensation system for the independent directors applies to director compensation. The flat fee provides each independent
Board member an annual retainer of $160,000 ($195,000 effective January 1, 2022) and the Chair of the Board an annual retainer of $330,000.
The flat fee includes up to 10 Board meetings and for every Board meeting after 10, a meeting fee of $1,500 is paid ($1,750 effective
January 1, 2022). The latter per meeting fee applicable to meetings in excess of 10 is designed to reflect the significantly increased
time, attention and responsibilities that directors will face if more than 10 meetings per year are required.
The fees are determined in recognition of the
significant time and energy required of the directors in the performance of their duties. Directors are expected to prepare for and attend
all Board meetings and ensure that they stay informed about the Company’s business and the rapidly changing industry, business and regulatory
environment. In addition, the Board believes that the Company must offer a competitive compensation package to attract and retain experienced,
skilled and knowledgeable directors who are willing and able to meet these expectations. Please see the below tables that provide further
details of the fees and share-based awards for Directors.
Fees and Share-Based Awards Paid in 2021
| Name | |
Cash Fees Earned ($) | | |
Board Meeting/ Travel Fees(1)(2) ($) | | |
Committee Chair Fee ($) | | |
Share-Based
Awards(3) ($) | | |
All Other
Compensation ($) | | |
Total ($) | |
| Ambrose | |
| 80,000 | | |
| 1,500 | | |
| 15,000 (GSSC) | | |
| 80,000 | | |
| — | | |
| 176,500 | |
| Dielwart(4) | |
| 165,000 | | |
| 3,000 | | |
| — | | |
| 165,000 | | |
| — | | |
| 333,000 | |
| Fohrer(5) | |
| 100,175 | | |
| 3,818 | | |
| — | | |
| 100,175 | | |
| — | | |
| 204,168 | |
| Folse(5)(6) | |
| 66,365 | | |
| 1,897 | | |
| 12,443 (IPC) | | |
| 66,365 | | |
| — | | |
| 147,070 | |
| Goldgut(7) | |
| — | | |
| — | | |
| — | | |
| 160,000 | | |
| — | | |
| 160,000 | |
| Kousinioris(8) | |
| N/A | | |
| N/A | | |
| N/A | | |
| N/A | | |
| N/A | | |
| N/A | |
| Legault(7)(9) | |
| — | | |
| — | | |
| — | | |
| 54,725 | | |
| — | | |
| 54,725 | |
| Mansour(5)(10) | |
| 24,950 | | |
| — | | |
| — | | |
| 24,950 | | |
| — | | |
| 49,900 | |
| Nelson(5)(11) | |
| 34,010 | | |
| — | | |
| — | | |
| 34,010 | | |
| — | | |
| 68,020 | |
| O’Flynn(5)(12) | |
| — | | |
| 1,897 | | |
| — | | |
| 132,730 | | |
| — | | |
| 134,627 | |
| Park | |
| 80,000 | | |
| 3,000 | | |
| 25,000 (AFRC) | | |
| 80,000 | | |
| 35,000 | (13) | |
| 223,000 | |
| Pinney | |
| — | | |
| 3,000 | | |
| 25,000 (HRC) | | |
| 160,000 | | |
| 35,000 | (13) | |
| 223,000 | |
| Reid(7) | |
| — | | |
| — | | |
| — | | |
| 105,275 | | |
| — | | |
| 105,275 | |
| Sharman | |
| — | | |
| 1,500 | | |
| — | | |
| 160,000 | | |
| — | | |
| 161,500 | |
| Slusser(5)(14) | |
| 66,365 | | |
| — | | |
| — | | |
| 66,365 | | |
| — | | |
| 132,730 | |
| TOTAL | |
| 616,865 | | |
| 19,612 | | |
| 77,443 | | |
| 1,389,595 | | |
| 70,000 | | |
| 2,173,515 | |
Notes:
| (1) | Travel day fee of $1,500 (where
round-trip travel exceeds 1,000 km but is less than 7,500 km) or $3,000 (where round-trip
travel exceeds 7,500 km). |
| (2) | The flat fee includes up to 10 Board meetings. For every Board
meeting after 10, a meeting fee of $1,500 per meeting is paid. In 2021, the Board held 11 Board meetings. |
| (3) | Amounts are in Canadian dollars
and reflect the actual amounts paid in 2021. |
| (4) | Mr. Dielwart is Chair of the Board. |
| (5) | The compensation payable to Mr. Fohrer, Ms. Folse, Mr. Mansour,
Ms. Nelson, Mr. O’Flynn and Ms. Slusser is converted to US dollars using the exchange rate on the 13th day of the last month of each
compensation quarter. The amounts appearing in this table are in Canadian dollars and reflect the actual amounts paid. |
| (6) | Ms. Folse was appointed a director on May 4, 2021. |
| (7) | Mr. Goldgut, Mr. Legault and Mr. Reid elected to receive common
shares for 100% of their director compensation and directed the Company to register such common shares to an entity affiliated with Brookfield.
To the extent Mr. Goldgut, Mr. Legault or Mr. Reid are deemed to be the beneficial owner of any such shares, Mr. Goldgut, Mr. Legault
and Mr. Reid expressly disclaim beneficial ownership thereof. |
| (8) | Mr. Kousinioris is the President and CEO of the Company since
April 1, 2021, and, as such, does not receive any director compensation. His compensation is reported in the “Summary Compensation
Table” for Named Executive Officers (“NEOs”) in this Proxy Circular. |
| (9) | Mr. Legault retired from the Board on May 4, 2021. |
| (10) | Mr. Mansour retired from the Board on May 4, 2021. Mr. Mansour
was Chair of the IPC until May 4, 2021, and waived his chair fee during 2021. Mr. Mansour also waived his director compensation for the
second quarter of 2021. |
| (11) | Ms. Nelson retired from the Board on May 4, 2021. |
| (12) | Mr. O’Flynn was appointed a director on May 4, 2021. |
| (13) | Ms. Park and Mr. Pinney were each paid a fee of $35,000 in recognition
of the significant time and dedication required by each of them on behalf of the Company in response to the claim by Mangrove Partners
Master Fund, Ltd. |
| (14) | Ms. Slusser was appointed a director on May 4, 2021. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 70 |
Share-Based Awards Outstanding as at December 31, 2021
The following table discloses the number and
value of share-based awards held by directors and outstanding as at December 31, 2021. In accordance with best governance practices,
the Company does not grant stock options to its directors.
| Name | |
Number of Share-
Based Awards that have not Vested(1) (#) | | |
Market or Payout Value
of Share-Based Awards
that have not Vested ($) | | |
Market or Payout Value
of Vested Share-Based
Awards not Paid Out or
Distributed(2) ($) | |
| Ambrose | |
| — | | |
| — | | |
| 705,929 | |
| Dielwart | |
| — | | |
| — | | |
| 1,703,994 | |
| Fohrer | |
| — | | |
| — | | |
| 1,646,415 | |
| Folse | |
| — | | |
| — | | |
| 71,341 | |
| Goldgut | |
| — | | |
| — | | |
| — | |
| Kousinioris(3) | |
| N/A | | |
| N/A | | |
| N/A | |
| Legault | |
| — | | |
| — | | |
| — | |
| Mansour | |
| — | | |
| — | | |
| — | |
| Nelson | |
| — | | |
| — | | |
| 1,495,265 | |
| O’Flynn | |
| — | | |
| — | | |
| 71,341 | |
| Park | |
| — | | |
| — | | |
| 1,351,803 | |
| Pinney | |
| — | | |
| — | | |
| 952,579 | |
| Reid | |
| — | | |
| — | | |
| — | |
| Sharman | |
| — | | |
| — | | |
| 361,713 | |
| Slusser | |
| — | | |
| — | | |
| 71,341 | |
| TOTAL | |
| | | |
| | | |
| 8,431,721 | |
Notes:
| (1) | For purposes of the above table,
the DSUs are deemed to be fully vested upon issuance as the DSUs are paid out within a specified
period of time after the director ceases to be a director as set out int he Share Unit Plan. |
| (2) | Calculated using the 20-day volume-weighted
average price of our common shares on the TSX ending December 31, 2021 of $13.68. This calculation
includes dividend accruals on the DSUs . |
| (3) | Mr. Kousinioris is the President
and CEO of the Company since April 1, 2021, and, as such, does not receive any director compensation.
His compensation is reported in the “Summary Compensation Table” for Named Executive
Officers (“NEOs”) in this Proxy Circular. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 71 |
Value Vested During the Year
The table below includes the amount of variable
compensation that vested in 2021,which represents the amount of annual grants of DSUs and common shares made to our directors:
| | |
Option-based awards -
Value vested during the
year(1) | | |
Share-based awards — Value
vested during the year ($) | | |
Non-equity incentive plan
compensation — Value earned
during the year(3) | |
| Name | |
($) | | |
Shares | | |
DSUs(2) | | |
($) | |
| Ambrose | |
| — | | |
| — | | |
| 80,000 | | |
| — | |
| Dielwart | |
| — | | |
| 165,000 | | |
| — | | |
| — | |
| Fohrer | |
| — | | |
| — | | |
| 100,175 | | |
| — | |
| Folse | |
| — | | |
| — | | |
| 66,365 | | |
| — | |
| Goldgut | |
| — | | |
| 160,000 | | |
| — | | |
| — | |
| Kousinioris(4) | |
| N/A | | |
| N/A | | |
| N/A | | |
| N/A | |
| Legault | |
| — | | |
| 54,725 | | |
| — | | |
| — | |
| Mansour | |
| — | | |
| — | | |
| 24,950 | | |
| — | |
| Nelson | |
| — | | |
| 34,010 | | |
| — | | |
| — | |
| O’Flynn | |
| — | | |
| 66,365 | | |
| 66,365 | | |
| — | |
| Park | |
| — | | |
| — | | |
| 80,000 | | |
| — | |
| Pinney | |
| — | | |
| — | | |
| 160,000 | | |
| — | |
| Reid(6) | |
| — | | |
| — | | |
| 105,275 | | |
| — | |
| Sharman | |
| — | | |
| — | | |
| 160,000 | | |
| — | |
| Slusser | |
| — | | |
| — | | |
| 66,365 | | |
| — | |
| TOTAL | |
| | | |
| 480,100 | | |
| 909,495 | | |
| | |
Notes:
| (1) | In accordance with good governance
practices, we do not grant stock options to our directors. |
| (2) | For purposes of the above table,
the DSUs are deemed to be fully vested upon issuance as the DSUs are paid out within a specified
period of time after the director ceases to be a director as set out in the Share Unit Plan.
The value vested during the year for the DSUs excludes dividend accruals. |
| (3) | The Company does not have a non-equity
incentive plan for its directors. |
| (4) | Mr. Kousinioris is the President
and CEO of the Company since April 1, 2021, and, as such, does not receive any director compensation.
His compensation is reported in the “Summary Compensation Table” for Named Executive
Officers (“NEOs”) in this Proxy Circular. |
Breakdown of Annual Retainer
The following table shows the manner in which each director received
their annual retainer for the year ended December 31, 2021.
| Director | |
Cash (%) | | |
Equity (%) | |
| Ambrose | |
| 50 | | |
| 50 | |
| Dielwart | |
| 50 | | |
| 50 | |
| Fohrer | |
| 50 | | |
| 50 | |
| Folse | |
| 50 | | |
| 50 | |
| Goldgut(1) | |
| — | | |
| 100 | |
| Kousinioris(2) | |
| N/A | | |
| N/A | |
| O’Flynn | |
| — | | |
| 100 | |
| Park | |
| 50 | | |
| 50 | |
| Pinney | |
| — | | |
| 100 | |
| Reid(1) | |
| — | | |
| 100 | |
| Sharman | |
| — | | |
| 100 | |
| Slussser | |
| 50 | | |
| 50 | |
Notes:
| (1) | Mr. Goldgut and Mr. Reid elected to receive common shares for
100% of their director compensation and directed the Company to register such common shares to an entity affiliated with Brookfield. |
| (2) | Mr. Kousinioris, our President and CEO since April 1, 2021,
does not receive compensation as a director. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 72 |
Report on Executive Compensation
This section discusses executive compensation
at TransAlta, including our strategy, compensation governance, compensation elements, what we paid our most senior officers for 2021
and why, and how that relates to our share performance. The Human Resources Committee has reviewed and approved the content of this section
and the compensation details included herein.
| Table
of Contents |
|
|
|
| Letter
from Human Resources Committee |
74 |
| 2021
Executive Officers |
78 |
| Compensation
Discussion and Analysis |
80 |
| Executive
Summary |
80 |
| Compensation
Philosophy |
81 |
| 2021
Compensation Decisions |
82 |
| 2021
Executive Performance |
93 |
| 2021
CEO Realized Pay Analysis |
96 |
| 2021
Share Performance & Executive Pay |
97 |
| Compensation
Governance |
98 |
| Compensation
Governance & Risk Management |
98 |
| Independent
Advice |
100 |
| Benchmarking
Executive Compensation |
101 |
| Disciplined
Decision-Making Process |
102 |
| NEO
Share Ownership |
103 |
| 2021
Executive Compensation Details |
104 |
| Summary
Compensation Table |
104 |
| Incentive
Plan Awards |
106 |
| Retirement
Plans, Benefits & Life Insurance |
108 |
| Termination
& Change of Control |
111 |
| | TransAlta Corporation | 2022 Management Proxy Circular | 73 |
Letter from the Human Resources Committee
Dear Shareholders,
The Human Resources Committee (“HRC”)
is the committee of the Board that has oversight of TransAlta’s compensation programs. We remain committed to our five-pillar executive
compensation philosophy that is designed to incent management to achieve strategic objectives that will create long-term value for Shareholders,
focus on pay for performance, align with Shareholder interests, ensure effective oversight and risk management, and attract and retain
talent, all with a view to advancing TransAlta’s transition to a leader in clean electricity. We are pleased to share this compensation
philosophy and describe our leading practices and our strong governance in the Compensation Discussion and Analysis (“CD&A”)
that follows.
Our Corporate Strategy and 2021 Accomplishments
The Company made significant progress toward
achieving its strategic goals. For specific details on our 2021 highlights, please refer to page 90.
The focus of the Company continues to be on capitalizing
on market opportunities and transitioning to clean power generation. Growth is being driven by optimizing and diversifying our existing
assets and further expanding our overall portfolio in Canada, the US and Australia. We continue to invest in a range of clean and renewable
technologies — such as wind, hydro, solar, battery storage for industrial customers and communities — to deliver solid returns
to our Shareholders. The Company made significant progress toward achieving its strategic goals in 2021, including the following:
| · | Establishing our Clean Electricity Growth Plan, with targets
to deliver 2 GW of incremental renewables capacity with a targeted investment of $3 billion by 2025; |
| · | Executing two long-term Power Purchase Agreements for the offtake
of 100% of the generation from the 300 MW White Rock East and White Rock West Wind Power projects to be located in Caddo Country, Oklahoma; |
| · | Maximizing our Alberta merchant fleet operations to generate
significant shareholder value; |
| · | Closing the acquisition of a 122 MW portfolio of 20 solar facilities
located in North Carolina; |
| · | Completing the full conversion of Keephills Unit 2, Keephills
Unit 3 and Sundance Unit 6 from thermal coal to natural gas, maintaining the same generator nameplate capacity of MW, ultimately reducing
our CO2 emissions by more than half and resulting in being 100% clean electricity in Alberta by the end of 2021; |
| · | Announcing the long-term Power Purchase Arrangement with Pembina
Pipeline Corporation for 100 MW of the Garden Plain project; |
| · | Extending the Sarnia Cogeneration Facility contract to December
31, 2032; |
| · | Announcing the retirement of Keephills Unit 1 at the end of
2021 and Sundance Unit 4 in 2022; |
| · | Approving an 11% increase to our common share dividend on January
1, 2022; and |
| · | Securing Board approval of the development of our five-year
ED&I Strategy and executing the first year of the ED&I Strategy. |
Compensation and Governance Enhancements
To continue to support our corporate strategy,
we made some important enhancements to our compensation and governance programs, including:
| · | Enhancing our annual Code of Conduct process by implementing
mandatory annual Code of Conduct training for all employees; |
| · | Providing director education by presenting “2021 Executive
Pay and Governance Trends” to the HRC in October, a joint effort by our Board and management external compensation advisors, Farient
Advisors LLC and Mercer Canada Limited; |
| · | Strengthening our executive compensation peer group by adding
Boralex Inc., a Canadian renewable energy generation company to the peer group mix; |
| · | Reinstating employer contributions to our Defined Contribution
Pension Plan from five per cent to a maximum of eight per cent, depending on voluntary employee contributions, given the financial improvement
of the Company and to align TransAlta with the median pension contribution levels of our peers; |
| · | Modifying our current stock option three-year cliff vesting
structure to a three-year ratable vesting structure that is consistent with our peer group and minimizes the impact of the new rules
governing taxation on stock options in Canada; and |
| · | Shifting our approach to treasury-settling of Performance Share
Units (“PSUs”) and Restricted Share Units (“RSUs”) instead of purchasing shares on the open market and maintaining
a robust share ownership requirement for executives to encourage share ownership. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 74 |
Pay for Performance
The HRC reinforces the Company’s emphasis
on pay-for-performance by annually reviewing the executive compensation programs and approving the Company’s salary planning guidelines
and the targets and goals for incentive compensation plans, including giving specific consideration to the strategic measures and goals.
A strong link between executive compensation and Company performance is maintained by offering a metric-based Annual Incentive Compensation
(“AIC”) Plan and a Long-Term Incentive Plan (“LTIP”) consisting of of RSUs, PSUs and Stock Options.
Our AIC and PSU metrics remain simple, clear,
measurable and focused on results that drive value for our Shareholders. In 2021, we reviewed and refreshed the metrics of our AIC and
LTIP to shift the weightings of our pay-for-performance compensation to align with our clean energy growth strategy, corporate strategic
objectives, and Shareholder results. Refer to page 80 to review our 2021 scorecard performance
results.
Looking ahead, our 2022 metrics highlight the
following themes:
Annual Incentive Compensation Plan
| · | Continuing to remain focused on financial performance, while
increasing emphasis on strategic clean energy growth and maintaining several measurable ESG targets; and |
| · | Aligning targets with Shareholder value creation, with a continued
focus on both cash flow and growth that cascades into the business units to drive corporate strategy throughout the business and functional
groups by including a target goal of achieving free cash flow of $505 million. |
Long-Term Incentive Plan
| · | Maintaining a 55% performance-based LTIP program that exceeds
the market standard of 50%; and |
| · | Granting PSUs in accordance with consistent performance metrics
and targets that are focused on financial performance, aligned with Shareholder results, and the furtherance of our long-term strategic
goals. |
The rigour of our incentive plan goals and ranges
are reviewed annually by Farient Advisors LLC, the HRC’s external compensation advisor, to ensure suitability based on TransAlta’s recent
and projected plan performance, analyst expectations, and appropriateness of how pay varies with performance.
We believe our recent pay program enhancements
and risk assessment processes continue to fortify TransAlta’s executive compensation philosophy, discussed on page 81 of our CD&A,
further aligning the interests of our executives with our Shareholders.
Shareholder Engagement
We remain actively engaged in Shareholder outreach
and believe that ongoing involvement is paramount. Throughout 2021, the Board engaged directly with Shareholders representing
39% of outstanding shares. The HRC considers interaction
and communication with Shareholders a significant tool to ensure alignment of the Company’s executive compensation program with Shareholder
interests. We also met with proxy advisory firms to describe TransAlta’s compensation program, stay current with respect to best
practices and consider Shareholders’ input. In the fall of 2021, management shared our ongoing ED&I Strategy with Shareholders and
received Shareholder input about our gender diversity targets.
At the 2021 annual meeting, we were pleased that
97.25% of Shareholders supported our approach to executive compensation. This follows strong results of 98.75% approval at the 2020 annual
meeting.
Evolving Talent Strategy and Succession Planning
TransAlta considers its people to be its greatest
asset and developing and retaining talent is central to our ongoing growth and future success. The HRC is responsible for ensuring that
strong talent management programs and succession plans are in place that respond to the evolving nature of the business and the future
of work. Each quarter, management and the HRC spent significant time engaging in thoughtful and ongoing discussions on the management
succession plans to ensure that the executive team has the right background and skills to be strategic executors and is able to move
the Company forward in an agile and innovative manner.
The HRC is committed to developing internal succession
candidates for leadership positions and ensuring smooth transitions with leadership changes. We are immensely proud of our talented pipeline,
which enabled us to successfully transition to a new CEO and promote a number of senior executive leaders in 2021, smoothly and seamlessly
in an exceptional performance year.
| | TransAlta Corporation | 2022 Management Proxy Circular | 75 |
In 2021, we were pleased to announce the following
internal promotions:
| · | John Kousinioris to President and
CEO with the retirement of Dawn Farrell on March 31, 2021; |
| · | Aron Willis, Senior Vice President,
Growth to Executive Vice President, Growth; |
| · | Blain van Melle, Senior Vice President,
Trading and Commercial to Executive Vice President, Alberta Business; |
| · | Brent Ward, Managing Director, Corporate
Finance and Treasurer to Senior Vice President, Mergers and Acquisitions, Strategy and Treasurer;
and |
| · | Michelle Cameron, Manager, Financial Reporting to Vice President
and Corporate Controller. |
This year, we changed the officer titles of our
executives from Chiefs to Executive Vice Presidents to align with updated naming conventions and to give consideration to ED&I principles
and we also changed our Managing Director titles to Vice Presidents to align with this change.
The HRC expanded its mandate this year to include
the ED&I Strategy, as discussed below, to oversee management’s shift from a focus on organizational health to improving organizational
culture.
ED&I and Organizational Culture
We remain strongly committed to gender diversity
at the executive and Board level and have developed and cascaded diversity targets throughout the organization. Building off the ED&I
Pledge that the Board of Directors approved in 2020, the Company developed a five-year ED&I
Strategy committing to address the concerns and needs of the Company’s underrepresented and diverse employees and to increase equity
and inclusion for all employees. The Board of Directors approved the ED&I Strategy in August 2021 with TransAlta executing on the
first year of that strategy during the past year. To objectively measure improvements, we use an independent third-party provider.
In 2020, that provider executed a benchmarking survey to establish a baseline and conducted a survey of all employees that provides recommendations
based on the results and that are integrated into the evolution of our ED&I Strategy. ED&I forms part of our ESG program and
is part of our 2021 AIC Plan scorecard.
The Company engaged a leading executive and leadership
consulting firm, to assist TransAlta in exploring organizational culture improvements. We conducted a culture diagnostic survey with
the entire employee base, and held a Director education session in August 2021 to share the survey results and explain their importance
to supporting our business strategy. These recommendations and improvements will form part of our ESG program in 2022.
The COVID-19 Pandemic and Employee Wellness
As an “essential service,” we are maintaining
an employee-focused approach as we meet the operational demands of the communities and customers that we serve through the continuing
COVID-19 pandemic. We stay abreast of recommended protocols and update ours as needed to allow employees to work safely. We have continued
to liaise with a world-class epidemiologist and a vaccinologist who has provided scientific and medical information about the COVID-19
pandemic, vaccinations, boosters and variants to all employees through regular Company-wide town halls.
To enhance the health and wellness of our employees,
in May 2021, TransAlta gave all staff a day off with pay as a “thank-you day” and has provided additional compensation to all
employees to encourage resiliency and family time as COVID fatigue set in during 2021. We know that our employees continue to feel supported
while navigating through the pandemic because of the extra health and wellness measures taken by the Company based on feedback that we
have received from our employees.
Executive Compensation Best Practices and Governance
The HRC oversees the Company’s executive compensation
programs by monitoring best practices and aligning those practices with the Company’s evolving business strategies and needs in light
of the changing regulatory and competitive environment by:
| · | Setting target compensation at the
50th percentile of an industry comparator group using market data collected by external consulting
firms, as discussed on page 101; |
| · | Reviewing the comparator group annually
to maintain competitive positioning; and |
| · | Reviewing market trends in executive compensation with our independent
advisors to assess and consider enhancements annually to plan design and overall compensation. |
The HRC continues to consult with its independent
compensation advisor, Farient, who supports the Board’s ongoing efforts to maintain alignment of TransAlta’s executive compensation
plans with business strategy and Shareholder interests.
TransAlta’s performance in 2021 reflects the
efforts of the executive team and all employees in the organization. From an executive compensation perspective, no COVID-19 or other
adjustments were made to executive pay or to our 2021 AIC or LTIP compensation decisions.
| | TransAlta Corporation | 2022 Management Proxy Circular | 76 |
We are confident that TransAlta’s executive compensation
program works effectively, is aligned with the Company’s focus on becoming a leading clean electricity company and is performance-based.
Looking ahead to 2022, we believe that we have established a competitive compensation plan that will motivate and reward management to
execute our business strategy, continue to unlock the value of our assets and create long-term value.
Your Clear and Informed Vote is Important
The CD&A that follows provides clear and
comprehensive disclosure of our executive compensation program to allow Shareholders to make informed decisions on the advisory vote.
Your participation as a Shareholder is very important to us. We ask for your support by voting in favour of TransAlta’s approach to executive
compensation detailed in this Proxy Circular. Thank you for your trust and continued interest in the ongoing success of TransAlta.
 |
 |
| John Dielwart |
Bryan Pinney |
| Chair of the Board |
Chair of the Human Resources
Committee |
| | TransAlta Corporation | 2022 Management Proxy Circular | 77 |
2021 Executive Officers
Our 2021 NEOs are listed below, representing
their current position (or former position) within TransAlta.
| John
H. Kousinioris, President and Chief Executive Officer |
 |
Skills & Experience
Mr. Kousinioris became President
and Chief Executive Officer on April 1, 2021. John’s prior leadership roles as Chief Legal and Compliance Officer, Chief Growth Officer
and, most recently, Chief Operating Officer, have provided him with responsibility for almost every aspect of TransAlta’s business.
He has overseen operations, shared services, commercial, trading, customer solutions, hedging and optimization and business development.
Mr. Kousinioris also served as President and a director of TransAlta Renewables Inc. from 2017 to 2021.
Industry
Prior to joining TransAlta, Mr.
Kousinioris was a partner and co-head of the corporate commercial department at Bennett Jones LLP. He has over 30 years of experience
in securities law, mergers and acquisitions and corporate governance matters, and has represented clients in some of Canada’s
largest public offerings and merger transactions.
Qualifications
Mr. Kousinioris has a Bachelor
of Arts degree in Business Administration from the Richard Ivey School of Business at the University of Western Ontario, a Master
of Business Administration degree from York University and a Bachelor of Laws degree from Osgoode Hall Law School at York University.
He has also attended the Advanced Management Program at Harvard University.
|
| Todd
Stack, EVP, Finance & Chief Financial Officer |
 |
Skills
& Experience
Mr. Stack became Chief Financial Officer on May
16, 2019. He is responsible for providing leadership and direction over TransAlta’s financial affairs and has significant experience
in finance, valuation, economics and the power industry. Prior to this role, Mr. Stack was the Company’s Corporate Controller,
Corporate Treasurer and a member of the corporate development team reviewing greenfield and acquisition opportunities. Mr. Stack assumed
the role of President of TransAlta Renewables Inc. effective February 6, 2021.
Industry
Prior to joining the finance team at TransAlta,
Mr. Stack held several roles in the engineering team, including design, operations and project management.
Qualifications
Mr. Stack has a Bachelor of Science degree in
Electrical Engineering from the University of Alberta and a Master of Business Administration degree from the University of Calgary.
He is a registered professional engineer in Alberta and a Chartered Financial Analyst.
|
| Mike
Novelli, EVP, Generation |
 |
Skills
& Experience
Mr. Novelli joined TransAlta as Executive Vice
President, Generation on May 19, 2020. He oversees TransAlta’s global operations across all fuel types.
Industry
Mr. Novelli is a multidisciplined, senior operating
executive having over 25 years of international operations and development experience in the energy and power generation business. Prior
to joining TransAlta, he most recently held the position of Chief Operating Officer at InterGen, a global independent power generation
and energy development company. He began his independent power producer career following six years in the US Navy, departing as a First-Class
Petty Officer.
Qualifications
Mr. Novelli has his Associate of Science Degree
from the University of New York Regents College (now called Excelsior College), and completed the Director Professionalism Program with
the National Association of Corporate Directors.
|
| | TransAlta Corporation | 2022 Management Proxy Circular | 78 |
| Kerry O’Reilly Wilks, EVP, Legal, Commercial & External Affairs |
|
Skills & Experience
Ms. O’Reilly Wilks joined TransAlta on November
26, 2018, and is currently the Executive Vice President, Legal, Commercial & External Affairs. Her portfolio spans legal, regulatory,
market policy, government relations, commercial, corporate secretarial, trading compliance, Indigenous and community relations and ESG
sustainability - policy and advocacy. She is also a corporate director of TransAlta Renewables Inc.
Industry
Prior to joining TransAlta, Ms. O’Reilly
Wilks was Head of Legal, North Atlantic & UK, for Vale S.A. In this role, she oversaw all issues of Vale’s business arising
in North America and the UK. Ms. O’Reilly Wilks also sat as the Head of Legal, Corporate & Marketing, as well as the Global
Chief Technology Counsel for Vale. In addition, she occupied a senior strategic advisory role with Vale’s Asia-Pacific affiliates,
including their public Indonesian affiliate, as Head of Legal, Asia Pacific. Prior to joining Vale, Ms. O’Reilly Wilks worked as
a partner with Davies Ward Phillips & Vineberg LLP.
Qualifications
Ms. O’Reilly Wilks has a Bachelor of Science
degree in Neuropsychology from Dalhousie University and a Bachelor of Laws degree from the University of New Brunswick.
|
| Jane N. Fedoretz, EVP, People, Talent and Transformation |
 |
Skills & Experience
Ms. Fedoretz joined TransAlta on November
19, 2018, and is currently the Executive Vice President, People, Talent and Transformation. She is responsible for oversight and governance
of all Human Resource matters, including people, talent, executive compensation, disability, benefits and pensions, recruitment, organizational
culture, TransAlta’s transformation office and corporate communications.
Industry
Prior to joining TransAlta, Ms. Fedoretz
held the role of Counsel in the Energy Group at Blake, Cassels & Graydon LLP; Vice President, General Counsel, Chief Compliance Officer
and Privacy Officer at CEDA International Corporation, a privately held industrial services company; and held legal roles at Petro Canada,
Jacobs Canada, and a private legal practitioner specializing in industrial and civil construction law matters.
Qualifications
Ms. Fedoretz holds a Bachelor of Social
Work degree from the University of Calgary and Bachelor of Laws degree from the University of Alberta. She is an active member of the
Law Society of Alberta.
|
| Dawn L. Farrell, Former President and Chief Executive Officer |
 |
Skills & Experience
Ms. Farrell retired from TransAlta on
March 31, 2021. She was President and CEO of TransAlta from January 2, 2012, to the date of her retirement, following previous roles as
Chief Operating Officer and Executive Vice President, Commercial Operations and Development over the course of her 36-year career in the
electric energy industry. Ms. Farrell was a member of various boards throughout her career, and was instrumental in transforming TransAlta
to a clean energy company.
|
| | TransAlta Corporation | 2022 Management Proxy Circular | 79 |
Compensation Discussion and Analysis
This Compensation
Discussion and Analysis provides a detailed description of our executive compensation philosophy, how executive pay links to corporate
strategy, and the decisions the HRC have made under our compensation programs and the factors considered in making those decisions.
Executive Summary
2021 Performance
We were pleased to be able to significantly exceed
our 2021 market guidance through unprecedented times. We continued to execute on our strategy to become a leading Canadian clean energy
company. We remain positive and focused on our long-term strategic goals as we completed our conversions from coal to gas, strengthened
our balance sheet, and focused on building renewables growth and sustainability. As part of our transformation to clean energy, we were
able to achieve several significant milestones that directly contributed to creating long-term Shareholder value. For specific details
on our 2021 highlights, please refer to page 90. Our key accomplishments are also fully described in our Management Discussion &
Analysis.
2021 Compensation Outcomes
Our 2021 executive compensation program is aligned
with Shareholder interests and financial and strategic performance. In 2021, the total compensation for our NEOs was equivalent to 0.94%
of the Company’s consolidated revenue. Our strong AIC and PSU results for 2021 are outlined below.
| ü 2021 AIC Awards |
|
ü 2019-2021 PSU Awards |
| Scorecard Result: 185% |
|
Scorecard Result: 166% |
| · |
FCF was weighted 60% and the result was 200% of target |
|
· |
Three-year cumulative EBITDA was weighted 33.33% and the result
was 115% of target |
| |
|
|
| · |
Incremental EBITDA from growth and customers was weighted 20%
and the result was 200% of target |
|
· |
The strategic metric was weighted 33.33% and the overall
result was 183% of target |
| |
|
|
| · |
Safety metrics were weighted 10% and the result was 100% of
target |
|
· |
Relative Total Shareholder Return (“Relative TSR”)
relative to the S&P/TSX Capped Utilities Index was weighted 33.33% and the result was 200% of target |
| · |
ESG measures of environmental critical targets, organizational health and ED&I were weighted 10% and the result was 150%
of target |
|
|
| |
|
|
| | TransAlta Corporation | 2022 Management Proxy Circular | 80 |
Compensation Philosophy
How We Link Strategy and Compensation
The five pillars of our approach to executive
compensation are:
Objective In 2021, TransAlta’s
strategic goals were to:
| · | Establish
a strong and growing customer base and secure the re-contracting of assets; |
| · | Make
substantive advancement on expansion of our asset base across the fleet, including through: |
| a. | The addition
of onsite generation projects in Australia; and |
| b. | The addition
of wind and other renewables generation projects in Canada and the US. |
| · | Advance
ESG metrics by continuing to improve the environmental footprint of the Company by advancing
and executing on the Alberta conversion and repowering strategy, including but not limited
to reducing our CO2 emissions; |
| · | Establish
a strong, sustainable and long-term ED&I program that enhances the organizational health
and culture of the Company; |
| · | Further
diversify the Company’s cash flows across our core markets and across technologies; and |
| · | Maintain
our financial position. |
These goals were chosen because
they represent the highest priorities with the greatest impact on long-term Shareholder value.
Approach PSU performance
factors are established based on the achievement of strategic goals for each year in the three-year performance cycle.
Objective Executive
compensation is linked to financial and operational metrics that align with our strategy and the performance of our common share price.
Approach 71% of the
NEO’s pay mix is considered “at-risk” and consists of long-term and short-term incentives.
| 3. | Align with Shareholder Interests |
Objective Our compensation
program generates sustainable long-term value for our Shareholders.
Approach Executives
earn more through “at-risk pay” when corporate performance and Shareholder returns are above expectations, and less when
performance is below expectations. The AIC Plan and the PSUs have a payout range of 0-2x, which means payout could be as little as zero
and as high as 200% of target. RSUs and stock options provide additional value in line with total Shareholder returns.
| 4. | Effective Oversight and Risk Management |
Objective Our overall
compensation program, including the incentive plans, do not encourage inappropriate risk-taking.
Approach The HRC conducts
an annual risk assessment that reviews compensation programs, including all incentive plans, for their potential to induce undue risk-taking.
The HRC also receives advice from an independent, external advisor and reviews regulatory developments and compensation design trends
relating to executive compensation matters.
| 5. | Attract and Retain Key Talent |
Objective Attract and
retain executives in key roles to execute TransAlta’s strategy for long-term sustainable growth and build a talent pipeline for
future succession.
Approach Target compensation
is generally set at the 50th percentile of an industry comparator group using market data collected by external consulting firms. The
data includes a cross-section of Canadian and US companies in the energy industry that have a similar business model and revenue size,
and companies that we compete with for executive talent.
| | TransAlta Corporation | 2022 Management Proxy Circular | 81 |
2021 Compensation Decisions
At the 2021 annual
meeting, 97.25% of Shareholders supported our approach to executive compensation. Additionally,
in 2020, TransAlta was the recipient of the Gavel Award for Best Disclosure of Corporate Governance and Executive Compensation Practices
from the Canadian Coalition for Good Governance, which recognizes excellence in shareholder communications through annual proxy circulars.
TransAlta also improved our ranking to sixth place out of 220 Canadian listed companies in The Globe and Mail’s 2021 Board Games, from
14th place in 2020.
2021 Plan Enhancements and Updates
| Enhancements/Updates |
Rationale |
| Benchmarking |
|
|
The HRC approved changes to the executive
compensation peer group:
· Added:
Boralex Inc.
|
·
|
Further aligns with TransAlta’s business model, and meets most of our criteria for inclusion. While smaller and less complex than TransAlta, Boralex Inc. is similar in industry with respect to their emphasis on renewable power generation. |
| |
|
| Short-term Incentive (AIC Plan) |
|
| · |
In 2021, we retained the metric of FCF at its same weighting of 60% for consistency. |
· |
The AIC continues to emphasize financial performance through high weighting on FCF, while including a focus on the strategic objectives of: (i) growth in EBITDA from clean electricity; and (ii) adding quantitative, measurable and meaningful ESG targets for CO2 reduction projects, ED&I, organizational health and worker safety to our corporate metrics. |
| · |
Operations, Maintenance and Administration (“OM&A”) was removed as a corporate metric and replaced with 20% incremental EBITDA from growth and customers, 10% safety metrics and 10% ESG metrics.
|
| Enhancements/Updates |
Rationale |
| Long-term Incentive |
|
| · |
PSUs that vested in 2021 are reported on page 90, which
were granted in 2019. PSU metrics as set in 2019 (for the 2019 to 2021 performance period) included: (i) replacing FFO-to-debt with three-year
cumulative EBITDA targets; and (ii) changing the relative TSR score from a modifier to a target TSR percentile achievement against the
S&P/TSX Capped Utilities Index. |
· |
Introducing a measure of targeted overall EBITDA growth,
to replace FFO-to-debt, was consistent with TransAlta’s strategic growth focus over the 2019 to 2021 performance period. |
| · |
Strategic objectives remain consistent as the third metric
in our PSU scorecard. |
· |
The new relative TSR payout curve was analyzed by Farient and
was consistent with competitive norms. |
| · |
All three PSU measures are equally weighted at 33.3%. |
· |
Aligned the interests of NEOs and executives with Shareholder
interests. |
| PSU & RSU settlements: |
· |
Continues to promote robust executive share ownership
utilizing treasury-settled shares in accordance with our plans. |
| · |
Effective in 2021, a portion of all outstanding long-term
incentive PSU and RSU awards are settled as treasury shares (instead of settled on the open market) upon vesting and cannot be sold until
share ownership guidelines are met. |
|
| | TransAlta Corporation | 2022 Management Proxy Circular | 82 |
2021 Compensation Elements
We provide executive
compensation elements that include base salary and short-term and long-term incentives with a focus on pay-for-performance that is aligned
with our clean energy strategy set out in our Clean Electricity Growth Plan.
Executive compensation
is weighted towards variable or at-risk compensation, which is directly linked to our performance and the performance of our common shares,
aligning the interests of executives with those of Shareholders.
| |
Base
salary |
Short-term
incentives (AIC) |
Long-term
incentives (LTIP) |
| PSUs |
RSUs |
Options |
| Primary
purpose |
Market-competitive
fixed cash compensation based on NEO’s primary duties, responsibilities, role and work performed |
Reinforce
and drive short-term achievements from previous year
Recognize and reward performance |
Align
NEO interests with Shareholders
Recognize and reward performance |
Reinforce
and drive long-term Shareholder value |
Reinforce
and drive long-term Shareholder value |
| Performance
period |
Ongoing |
1
year |
3
years |
3
years |
7
years |
| Payment |
Ongoing |
After
the end of the performance period, payable in March |
After
the end of the performance period, upon vesting, payable in March |
When
exercised |
| Cash
or equity |
Cash |
Cash
or DSUs, at NEO’s election |
Settled
in shares, at Board’s discretion |
Common
shares when exercised |
| CEO
target pay mix |
 |
 |
 |
| Other
target NEO pay mix |
 |
 |
 |
| |
|
 |
| |
|
AT
RISK |
| | TransAlta Corporation | 2022 Management Proxy Circular | 83 |
Base Salary
The table
below shows the 2021 base salaries of TransAlta’s NEOs. Salaries are reviewed annually, and increases, if any, are made based on
individual performance, increased scope and additional responsibilities, or to remain market competitive. Mr. Kousinioris’ salary was
increased upon his promotion to President and Chief Executive Officer in 2021. Base salary increases were approved for Mr. Stack and
Ms. Fedoretz in 2021 based on the expanded scope of their roles and to improve their market competitive positioning in line with our
compensation philosophy of targeting the median base salary of our peer group.
| Name | |
2019 | | |
2020 | | |
2021 | |
John Kousinioris(1) President and Chief Executive Officer | |
$ | 625,000 | | |
$ | 625,000 | | |
$ | 850,000 | |
Todd Stack EVP,
Finance & Chief Financial Officer | |
$ | 425,000 | | |
$ | 425,000 | | |
$ | 500,000 | |
Mike Novelli(2) EVP, Generation | |
| — | | |
$ | 475,000 | | |
$ | 475,000 | |
Kerry O’Reilly Wilks EVP, Legal, Commercial & External Affairs | |
$ | 460,000 | | |
$ | 460,000 | | |
$ | 460,000 | |
Jane Fedoretz EVP, People, Talent and Transformation | |
$ | 400,000 | | |
$ | 400,000 | | |
$ | 460,000 | |
Dawn Farrell(3) Former President and Chief Executive Officer | |
$ | 1,000,000 | | |
$ | 1,000,000 | | |
$ | 1,000,000 | |
Notes:
| (1) | Mr. Kousinioris’ annual salary
was increased to $850,000 effective April 1, 2021, upon his promotion to President and CEO. |
| (2) | Mr.
Novelli was hired on May 19, 2020, and worked in the US earning US$337,250 annual salary
(C$452,357 equivalent using the 2020 average US$/C$ foreign exchange rate of 1.34131). Effective
October 1, 2020, Mr. Novelli moved to Canada and his annual salary was C$475,000. His salary
remained unchanged in 2021. |
| (3) | Ms.
Farrell’s annual salary remained unchanged between 2019 and 2021, up to her retirement date
effective March 31, 2021. |
Annual Incentive Compensation
In 2021, the executives’
AIC was determined entirely by corporate performance to align the NEOs with Company corporate performance:
Our corporate scorecard
was updated in 2021 to remove OM&A as a metric, as our strategy shifted away from cost control and efficiency (which we successfully
achieved in 2020), to a higher emphasis on growth and ESG in 2021 and beyond. The AIC Plan continues to emphasize financial performance
through the continuation of our 60% weighting on free cash flow (“FCF”), plus the addition of a 20% weighting on incremental
EBITDA from growth and customers. 10% was allocated to worker safety metrics, and the remaining 10% was allocated to quantitative, measurable
and meaningful ESG targets for CO2 reduction projects, ED&I, and organizational health. These metrics represent our 2021
strategy and emphasize the highest short-term priorities with the greatest impact on Shareholder value. No COVID-19 or other adjustments
were made to our 2021 AIC executive compensation decisions.
| FCF |
|
Incremental
EBITDA from Growth and Customers |
| FCF
is a key metric representing the amount of cash available to invest in growth initiatives, make repayments on debt, pay common share
dividends or repurchase common shares. |
|
In
support of our growth strategy, this metric includes incremental proforma EBITDA to be earned from announced growth projects for
TransAlta. |
| Safety |
|
ESG |
| Safety
metrics include quantifiable measures, including both a leading indicator (Total Safety Report Frequency Rate) and a lagging indicator
(Total Recordable Injury Frequency). Specific safety targets and achievements are not disclosed for competitive reasons. |
|
The
ESG score was equally weighted between three measures: (i) Environmental Critical Projects completed, (ii) Organizational Health
Index Score, and (iii) ED&I score. Targets and scores for (ii) and (iii) are objective, quantitative metrics established and
measured by independent third-party organizations. Specific targets and achievements are not disclosed for competitive reasons. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 84 |
The table below
shows how the HRC calculated the 2021 corporate scorecard result. The Board and the HRC believe this appropriately reflects the excellent
progress achieved in 2021, as TransAlta continues to transform to a leading clean energy company.
Corporate Scorecard Results
| Metric | |
Weight | | |
Threshold
50% | | |
Target
100% | | |
Maximum
200% | | |
2021 result | | |
% of target
achieved | | |
2021
performance
factor | |
| FCF(1) | |
| 60 | % | |
$ | 300M | | |
$ | 360M | | |
$ | 445M | | |
$ | 562M | | |
| 200 | % | |
| 120 | % |
| Incremental EBITDA from growth and customers(2) | |
| 20 | % | |
$ | 20M | | |
$ | 35M | | |
$ | 60M | | |
$ | 92M | | |
| 200 | % | |
| 40 | % |
| Safety | |
| 10 | % | |
| Not disclosed for competitive reasons | | |
| 100 | % | |
| 10 | % |
| ESG | |
| 10 | % | |
| Not disclosed for competitive reasons | | |
| 150 | % | |
| 15 | % |
| Corporate Result | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 185 | % |
Notes:
| (1) | These results are as disclosed
in TransAlta’s MD&A. |
| (2) | These
results are disclosed in TransAlta’s MD&A section Accelerated Clean Electricity Growth
Plan. It includes incremental average annualized EBITDA from the Garden Plain, White
Rock Wind and Northern Goldfields Solar projects, as
well as the acquisition of North Carolina Solar. All EBITDA is reported in the above table
in Canadian dollars, converted using the December 31, 2021, foreign exchange rates of US$1
= C$1.2776 and AU$1 = C$0.92728. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 85 |
The following table
outlines the 2021 annual incentives for each NEO:
2021 Executive AIC
| Name | |
Earned salary
in 2021(1) |
|
AIC target (%)
of salary |
|
Corporate performance factor &
weighting(2) | |
|
2021 AIC | |
John Kousinioris(3) President and Chief Executive Officer | |
$793,750 |
x |
100% |
|
x |
(185 | % |
x |
100 | %) | |
= |
$1,396,172 | |
Todd Stack EVP, Finance & Chief Financial Officer | |
$500,000 |
x |
70% |
|
x |
(185 | % |
x |
100 | %) | |
= |
$647,500 | |
Mike Novelli EVP, Generation | |
$475,000 |
x |
70% |
|
x |
(185 | % |
x |
100 | %) | |
= |
$615,125 | |
Kerry O’Reilly Wilks EVP, Legal, Commercial & External Affairs | |
$460,000 |
x |
70% |
|
x |
(185 | % |
x |
100 | %) | |
= |
$595,700 | |
Jane Fedoretz EVP, People, Talent and Transformation | |
$460,000 |
x |
70% |
|
x |
(185 | % |
x |
100 | %) | |
= |
$595,700 | |
Dawn Farrell(4) Former President and Chief Executive Officer | |
$250,000 |
x |
100% |
|
x |
(185 | % |
x |
100 | %) | |
= |
$462,500 | |
Notes:
| (1) | Earned salaries reflect pro-rated
earnings in the 2021 year. |
| (2) | In 2021, 100% of executive AIC
was based on corporate performance results. |
| (3) | Mr. Kousinioris’ target increased
from 75% to 100% upon his promotion to President and CEO in April 2021. His earned salary of $156,250 and his previous AIC target of
75% prior to his promotion were used to calculate a portion of his incentive. The remaining incentive amount was based on his earned
salary of $637,500 and his new AIC target of 100% after his promotion. His 2021 AIC reflects the sum of these amounts. |
| (4) | Ms.
Farrell retired as President and CEO on March 30, 2021. Ms. Farrell’s AIC was pro-rated to
her salary earned up to the date of her retirement, and was paid out at target upon her retirement.
In addition, the Board approved that Ms. Farrell would also be paid for actual performance
achieved in 2021 should such amount be higher than target, resulting in an actual total payout
at 185%. |
Recognition Bonus for Ms. Farrell
In
2021, the Board gave consideration to Ms. Farrell’s significant contributions over the previous five years in leading TransAlta through
a significant business transition, as well as executing on succession plans to prepare for her eventual retirement, which occurred on
March 31, 2021. Ms. Farrell was a 35-year professional, including 10 years as CEO at TransAlta, who had deep knowledge of the power generation
business. She moved the Company through significant headwinds over the previous five years by: (i) effectively positioning the Company
for a major successful transformation off-coal to renewable energy; (ii) preparing the Company for an energy transition in Alberta from
a capacity market to a merchant market in late 2020, which significantly changed the business landscape for TransAlta; and (iii) developing
and executing on succession plans for several internal successors, including the successor CEO, all of which set the foundation for success
following her retirement. This transition was executed seamlessly, and the Company is currently realizing exceptional performance directly
attributable to Ms. Farrell’s efforts.
To
recognize these significant achievements, the Board took several steps to determine the appropriateness of an incremental recognition
payment. A thorough governance process was undertaken by the Board, including the engagement of its independent compensation provider,
Farient, to determine the appropriateness of the payment. A broad range of market research and consultation was performed, including
understanding current market practices and the prevalence, form and amounts of recognition payments.
Following
this thorough review, and given of all of Ms. Farrell’s significant contributions during her tenure as CEO, the Board determined it was
appropriate in the circumstances to recognize Ms. Farrell with a bonus of $1,000,000, paid in cash, subject to all statutory withholdings.
This recognition bonus is included in the Summary Compensation Table as non-equity incentive plan compensation.
| | TransAlta Corporation | 2022 Management Proxy Circular | 86 |
Long-Term Incentives
For the 2021-2023
performance cycle, LTIP grants were based on a percentage of salary and consisted of PSUs, RSUs and Stock Options.
| | |
| | |
| | |
Allocation | |
| Name | |
2021 Grant value | | |
Grant value as a %
of salary | | |
PSUs | | |
RSUs | | |
Options | |
| John Kousinioris(1) | |
$ | 1,906,250 | | |
| 240 | % | |
| 55 | % | |
| 25 | % | |
| 20 | % |
| Todd Stack | |
$ | 750,000 | | |
| 150 | % | |
| 55 | % | |
| 25 | % | |
| 20 | % |
| Mike Novelli | |
$ | 712,500 | | |
| 150 | % | |
| 55 | % | |
| 25 | % | |
| 20 | % |
| Kerry O’Reilly Wilks | |
$ | 690,000 | | |
| 150 | % | |
| 55 | % | |
| 25 | % | |
| 20 | % |
| Jane Fedoretz | |
$ | 690,000 | | |
| 150 | % | |
| 55 | % | |
| 25 | % | |
| 20 | % |
| Dawn Farrell | |
$ | 2,800,000 | | |
| 280 | % | |
| 55 | % | |
| 25 | % | |
| 20 | % |
Note:
| (1) | Mr. Kousinioris’
target grant value noted above is based on his salary and target as Chief Operating Officer for three months with a salary of $625,000
and an LTIP percentage of 200% and nine months based on his promotion to President and CEO at a salary of $850,000 and an LTIP percentage
of 250%. He received $1,250,000 worth of grants on January 1, 2021, during the annual grant cycle and received an additional top-up of
$656,250 worth of grants after his promotion. |
The Board, on the
recommendation of the HRC, approves the number of PSUs, RSUs and stock options to be granted every year, which are calculated based on
the five-day Volume-Weighted Average Price (VWAP) and Black-Scholes Valuation (BSV) method as at the applicable grant date, in accordance
with the provisions of the Share Unit Plan and the Stock Option Plan. The Board also approves the PSU performance metrics, targets and
weightings for the PSU awards. Stock options are exercisable for common shares reserved for issuance from treasury. Under the LTIP, the
Company intends to settle a portion of PSUs and RSUs, once vested, through common shares issued from treasury.
PSUs were granted
in 2021 with the following performance metrics for the performance year 2021 to 2023:
| PSU Scorecard |
| Metric | |
| Weight | | |
Threshold | |
| Target | | |
| Max | |
| Payout Range | |
| | | |
50 | % |
| 100 | % | |
| 200 | % |
| Three-year cumulative EBITDA | |
| 33.3 | % | |
Not disclosed for competitive reasons | |
| Strategic asset diversification & strategic outcomes | |
| 33.3 | % | |
2021-2023 Board-Approved Metric | |
| Relative TSR | |
| 33.3 | % | |
P25 | |
| P50 | | |
| P85 | |
The three-year
cumulative EBITDA target and ranges, and the strategic asset diversification & strategic outcomes metrics, are not disclosed in the
circular until the PSU awards have vested. These metrics are set annually by management and are approved by the Board, and tie closely
to management’s strategic priorities over the short and long term, as well as the state of the power market in the geographies we operate
in. Three-year cumulative EBITDA is forward-looking, and we believe disclosure of specific EBITDA targets would seriously prejudice the
Company’s interests. We believe targets are set at appropriately challenging levels.
Clawback Policy
As part of its
compensation risk mitigation practices, the Company has a clawback policy that provides the Board with the discretion to cancel unvested
incentive awards and/or “claw back” vested and/or paid incentive awards, as applicable, in situations where the Board determines
the executive engaged in gross negligence, intentional misconduct, fraud or other serious misconduct (which includes, but is not limited
to, dishonesty or a breach of company policy to the material detriment of the Company’s business or reputation and any conduct
that would qualify as cause for termination of employment at common law) irrespective of whether there was a financial restatement. This
clawback policy applies to all variable compensation plans at TransAlta.
Share Unit Plan — PSUs and
RSUs
All currently issued
and outstanding PSUs and RSUs are governed by the terms of the Company’s Share Unit Plan. In 2021, the Company amended the Share Unit
Plan to, among other things, provide for the issuance of common shares from treasury upon the settlement of RSUs and PSUs. The Share
Unit Plan was approved by Shareholders at the annual and special meeting of Shareholder held on May 4, 2021. Subsequent to May 4, 2021,
the Company amended the Share Unit Plan for certain housekeeping and administrative matters. Although such amendments were immaterial
and did not require shareholder approval, the Company obtained the approval of the TSX and duly filed the amended Share Unit Plan on
the Company’s SEDAR profile at www.sedar.com. The amendments related
to revisions to the definition of “Retirement”; clarifying how performance metrics for PSUs are to be calculated in instances
of early retirement or termination without cause; and certain minor grammatical corrections.
| | TransAlta Corporation | 2022 Management Proxy Circular | 87 |
The
aggregate number of shares that may be issued at any time under the current Share Unit Plan shall not exceed 7,000,000 shares in the
aggregate (representing 2.58% of the issued and outstanding common shares at December 31, 2021). If
a unit is expired, cancelled or terminated before being settled, or redeemed for cash on settlement (including units redeemed with common
shares purchased on the open market pursuant to the terms of the Share Unit Plan), then the common shares that were subject to the unit
but that were not issued pursuant to the settlement shall, unless the Share Unit Plan has been terminated, become available for issuance,
all within the maximum limitation stated above.
As
of December 31, 2021, there were 4,605,341 PSU and RSU share units outstanding (representing approximately 1.7% of the issued and outstanding
common shares) under the Share Unit Plan. If all outstanding PSUs and RSUs were settled in shares from treasury, the number of remaining
common shares available for grant is 2,394,659 (assuming the PSUs achieve target performance), representing 0.9% of the total issued
and outstanding common shares at December 31, 2021 (non-diluted). The Company anticipates maintaining
its normal course issuer bid and to actively purchase common shares to further control for the dilutive effects of the Share Unit Plan
on Shareholders.
The summary of
the material terms of the Share Unit Plan set out below is qualified in its entirety by reference to the full text of the Share Unit
Plan which can be found under our profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
| Share
Unit Plan Summary — PSUs and RSUs |
| Primary
purpose |
ü
ü
ü
|
Encourage
NEOs to promote the financial interests, growth and development of TransAlta through provision
of PSUs and RSUs to acquire a proprietary interest in the Company
Advance
the interests of the Company and its Shareholders by providing the participants a performance incentive that aligns with the strategic
goals of the Company and the interests of Shareholders
Recognizes
NEOs’ contributions to Company success and is a retention tool for our executives
|
| Eligibility
& participation |
ü
ü
ü
|
Non-union
employees of TransAlta who, upon the advice of the CEO, are designated as participants by
the Board, including the NEOs
The
Board determines eligibility of individuals to participate and receive PSUs and RSUs under the Share Unit Plan, and determines when,
and the circumstances, any individual will be considered to have terminated employment for purposes of the Share Unit Plan
Executives
terminated without cause will be issued common shares or paid the cash equivalent, or a combination thereof, equivalent to the pro-rated
value of the number of non-vested RSUs and PSUs in the Participant’s notional account from the date of grant to the termination
date. In the case of PSUs, the performance factor will be deemed to be (1.0x) in the applicable period |
| Performance
period |
Three
years for PSU grants (unless otherwise established by the Board); not applicable for RSUs |
| Performance
criteria |
ü
ü
|
The
Board determines the applicable performance criteria and performance factor of the PSUs
The
PSU payout range is between 0-2x |
| Vesting |
Three-year
cliff vesting for PSU and RSU grants unless otherwise established by the Board |
| Payment |
When
vested |
| Cash
or equity |
Cash
or Share settled |
| Shares
subject to plan |
ü
ü
|
7,000,000
in aggregate
When
combined with all of the Company’s other security-based compensation, the aggregate number of common shares issued within any one-year
period may not exceed 10% of the Company’s total issued and outstanding shares |
| Grant
price |
Five-day
VWAP of the common shares on the TSX (or other stock exchange as applicable), on the grant date of the PSUs or RSUs |
| Change
of control |
Under
the Share Unit Plan, if there is a Change of Control (as defined in the Share Unit Plan): |
ü
ü
|
All
unvested Units then outstanding will be substituted with units of the surviving company or
the potential successor (the “continuing entity”) on the same terms and conditions
as the original Units
If
within 12 months of a change of control an executive is terminated without cause or the participant resigns from their employment for
good reason, the vesting of all Units then held by the participant will be accelerated in full, except that in the event that a Unit
is subject to vesting upon the attainment of performance criteria, then the number or value, as applicable, of Units that vest will be
calculated having regard to the pro rata achievement of any applicable performance criteria up to the termination date |
| Assignability |
Units
granted under the Share Unit Plan are not transferable or assignable |
| Plan
amendments |
The
Board has the discretion to make immaterial amendments to the Share Unit Plan as it deems necessary, without obtaining Shareholder
approval, subject to the rules of the TSX and NYSE |
| | TransAlta Corporation | 2022 Management Proxy Circular | 88 |
PSUs
The PSU awards
granted in 2019, for the 2019-2021 performance cycle, vested on January 1, 2022. They had a grant price of $5.59 per unit, earned dividend
equivalents and share-settled at 392% of their original grant value. Each of the following three metrics were equally weighted at 33.3%:
| Three-year cumulative EBITDA |
|
Strategic asset diversification & strategic outcomes |
|
Relative TSR |
| Three-year cumulative EBITDA, consistent with TransAlta’s strategic focus on growth over this three-year performance period |
|
· |
Management’s demonstrated progress to expand and diversify
its asset base through expansion of our clean portfolio |
|
· |
The relative TSR metric was used to further align PSU performance
results with the interests of Shareholders. Relative TSR ensures that management is rewarded for outperformance rather than general economic
growth |
| |
|
|
|
|
| |
|
· |
Management’s progress capturing value of the hydro assets in
Alberta and the value of coal-to-gas conversions |
|
· |
The payout curve is consistent with competitive norms |
| |
|
|
|
|
| |
|
· |
Management’s continued ability to influence critical policy
to achieve a workable market |
|
|
| PSU Scorecard |
| Metric | |
| Weight | | |
Threshold | |
| Target | | |
| Max | | |
| Result | | |
| Score | |
| Payout Range | |
| | | |
50 | % |
| 100 | % | |
| 200 | % | |
| | | |
| | |
| Three-year cumulative EBITDA | |
| 33.3 | % | |
Please See Table Below | | |
$ | 3.174B | | |
| 38 | % |
| Strategic asset diversification & strategic outcomes | |
| 33.3 | % | |
2019-2021 Board-Approved Metric | | |
| 183 | % | |
| 61 | % |
| Relative TSR | |
| 33.3 | % | |
P25 | |
| P50 | | |
| P85 | | |
| P88 | | |
| 67 | % |
| 2019-2021 PSU Scorecard Result | | |
| 166 | % |
The 3-year cumulative
EBITDA metric is measured on a yearly basis with a final cumulative EBITDA result and score:
| Year | |
Weight | | |
Threshold | | |
Target | | |
Max | | |
Result | | |
% of target achieved | | |
Score | |
| Payout Range | |
| | | |
| 50 | % | |
| 100 | % | |
| 200 | % | |
| | | |
| | | |
| | |
| 2019 | |
| | | |
| | | |
| | | |
| | | |
$ | 0.984B | | |
| | | |
| | |
| 2020 | |
| | | |
| | | |
| | | |
| | | |
$ | 0.927B | | |
| | | |
| | |
| 2021 | |
| | | |
| | | |
| | | |
| | | |
$ | 1.263B | | |
| | | |
| | |
| 2019-2021 | |
| 100 | % | |
$ | 2.925B | | |
$ | 3.150B | | |
$ | 3.300B | | |
$ | 3.174B | | |
| 115 | % | |
| 38 | % |
| Cumulative EBITDA Result | |
| 38 | % |
To properly assess
management’s performance against the strategic metrics, the HRC considered the following factors in its review:
| · | The state of TransAlta and the
Alberta power market at the start of each year, as well as over the three-year period; |
| · | The strategic priorities of the
management team at the start of each year; |
| · | Management’s accomplishments,
balanced with setbacks, in each year, as well as over the three-year period; and |
| · | The
final outcomes and impacts of our initiatives at the end of each year, as well as over the
three-year period. |
The HRC assessed
the performance of each strategic goal, resulting in a three-year cumulative result of 183%.
Details of this assessment are shown below.
| | TransAlta Corporation | 2022 Management Proxy Circular | 89 |
Assessment of 2019-2021 PSU Strategic
Metrics
Highlights of the
considerations relevant to the Company’s strategic asset diversification & strategic outcomes metric are as follows:
| Strategic
Asset Diversification & Strategic Outcomes Accomplishments |
| Financial |
| Announced
an 11% dividend increase on its Common Shares |
| Executed
on the Windrise financing |
| Conversions
to gas |
| Completed
full conversion of Sundance Unit 6 |
| Completed
full conversion of Keephills Unit 2 |
| Completed
full conversion of Keephills Unit 3 |
| Retirement
of Keephills Unit 1 and announced Sundance Unit 4 (Q1 2022) |
| Ceased
mining operations and burning coal in Canada |
| Successful
closing of Pioneer Pipeline sale to ATCO |
| Advancements |
| Unveiled
the Clean Electricity Growth Plan to the market at Investor Day in September 2021 |
| Expanded
the size of our development pipeline by adding ~ 600MW of new wind potential and ~175 MW of expansion projects with the Nickel West
and the South Hedland solar project |
| Announced
the development of the 48 MW Northern Goldfields Solar and storage project for BHP Billiton Nickel West with estimated construction
capital of ~AU$69 million to AU$73 million |
| Alongside
Pembina Pipeline, TransAlta announced the 100MW renewable PPA and the launch of the 130 MW Garden Plain wind project with estimated
construction capital of ~ $195 million |
| Announced
300 MW White Rock Wind Project – estimated construction capital of ~US$460 million to US$470 million |
| Closed
the acquisition of 122MW portfolio of solar facilities in North Carolina for ~$102 million |
| Completed
construction and reached commercial operation of the Windrise wind facility |
| Despite
global supply chain issues, advanced the interconnection of our first bitcoin mining facility at Sarnia |
| Announcements |
| President
& Chief Executive Officer succession |
| Resolved
the FMG litigation at South Hedland Power Station |
| Workforce
and safety |
| Certified
by an independent third-party provider for ED&I program |
| Developed
a 5-year ED&I Strategy, and executed the first year of the five-year strategy in 2021 with the Board of Directors approving the
ED&I Strategy |
| Achieved
top-quartile performance in organizational health annual survey |
| Implemented
a hybrid work policy for all non-union employees |
| Positively
maintained the COVID response |
| Corporate
leaders participated in mandatory Zero Incident Process training |
| Regulatory |
| Advocated
for Canadian federal tax credit for renewables with energy storage |
| Led
Alberta utility sector engagement with provincial and federal government on carbon capture, utilization and storage tax credit, ensuring
TransAlta’s views were represented |
| Refreshed
GHG emissions forecast for TransAlta based on new strategy to inform a new GHG target for the Company |
| Joined
the “Powering Past Coal Alliance” at COP26 in Glasgow and received a specific mention by Canada’s Minister of Environment
and Climate Change during a mainstage event |
Share Settlement of 2019-2021 PSU
Awards
| | TransAlta Corporation | 2022 Management Proxy Circular | 90 |
As noted above,
the PSUs granted in 2019 had a grant price of $5.59, earned dividend equivalents and settled at 392%
of their original grant value. The PSU Performance Factor of 166% was determined
and approved by the Board based upon the established metrics for the three-year performance period. The table below shows the value each
NEO received, calculated using a share price of $12.52, the five-day VWAP of our common shares on the TSX on the trading days preceding
the release date of March 7, 2022. PSUs were settled partly in cash to cover required tax and withholdings,
and the net amount was settled in common shares issued through treasury.
| Name |
|
2019
PSU award
(# of units) |
|
Dividend
equivalents |
|
PSU
performance
factor |
|
Five-day
VWAP |
|
Total
value |
| John
Kousinioris |
|
(84,861 |
+ |
4,591) |
x |
166% |
x |
$12.52 |
= |
$1,859,107 |
| Todd
Stack |
|
(18,157 |
+ |
982) |
x |
166% |
x |
$12.52 |
= |
$397,785 |
| Mike
Novelli(1) |
|
— |
+ |
— |
x |
— |
x |
— |
= |
— |
| Kerry
O’Reilly Wilks |
|
(56,574 |
+ |
3,061) |
x |
166% |
x |
$12.52 |
= |
$1,239,405 |
| Jane
Fedoretz |
|
(49,195 |
+ |
2,662) |
x |
166% |
x |
$12.52 |
= |
$1,077,747 |
| Dawn
Farrell |
|
(275,492 |
+ |
14,905) |
x |
166% |
x |
$12.52 |
= |
$6,035,379 |
Note:
(1)
Mike Novelli joined TransAlta on May 19, 2020, and was not at the Company for this grant cycle.
RSUs
Share Settlement of 2019-2021 RSU
Awards
The RSU awards
granted for 2019 vested on January 1, 2022. They had a grant price of $5.59 per unit, earned dividend equivalents and paid out at 247%
of their original grant value. The table below shows the value each NEO received, upon vesting of the 2019 RSU awards, calculated using
a share price of $13.11, the five-day VWAP of our common shares on the TSX on the trading days
preceding the release date of January 21, 2022. RSUs were settled part in cash to cover required tax and withholdings, and the net amount
was settled in common shares issued through treasury.
| Name |
|
2019
RSU award
(# of units) |
|
Dividend
equivalents |
|
Five-day
VWAP |
|
Total
value |
| John
Kousinioris |
|
(38,573 |
+ |
2,087) |
x |
$13.11 |
= |
$533,053 |
| Todd
Stack |
|
(9,079 |
+ |
491) |
x |
$13.11 |
= |
$125,463 |
| Mike
Novelli(1) |
|
— |
+ |
— |
x |
— |
= |
— |
| Kerry
O’Reilly Wilks |
|
(25,716 |
+ |
1,391) |
x |
$13.11 |
= |
$355,373 |
| Jane
Fedoretz |
|
(22,361 |
+ |
1,210) |
x |
$13.11 |
= |
$309,016 |
| Dawn
Farrell |
|
(125,224 |
+ |
6,775) |
x |
$13.11 |
= |
$1,730,507 |
Note:
(1)
Mike Novelli joined TransAlta on May 19, 2020, and was not at the Company for this grant cycle.
Stock Options
The stock option
awards granted in 2019 vested on January 1, 2022, and will expire on January 1, 2026. They had an exercise price of $5.59 per option.
The aggregate number
of common shares that may be issued at any time under the current Stock Option Plan shall not exceed 14,500,000 shares in the
aggregate (representing 5.4% of the issued and outstanding common shares). As of December 31, 2021, there were 3,216,711 options outstanding
(representing approximately 1.2% of the issued and outstanding common shares) under the Stock Option Plan and 3,631,085 options are currently
available for grant under the Stock Option Plan, representing approximately 1.3% of the issued and outstanding common shares (non-diluted).
In 2021, no amendments were made to
the Stock Option Plan or to any of the outstanding options, except in respect of the amendments to certain of Ms. Farrell’s stock
options as described elsewhere in this circular. Refer to the Termination and Change of Control details provided on page 112 for
further details.
| | TransAlta Corporation | 2022 Management Proxy Circular | 91 |
The summary of the material terms of the Stock Option Plan set out
below is qualified in its entirety by reference to the full text of the Stock Option Plan which can be found under our profile on SEDAR
at www.sedar.com and on EDGAR at www.sec.gov.
| Stock Option Plan Summary |
| Primary purpose |
ü |
Encourage NEOs to promote the financial interests, growth and development of TransAlta through provision of stock options to acquire a proprietary interest in the Company |
| |
ü |
Stock Options provide long-term “at-risk” compensation that helps ensure alignment with Shareholders in creating long-term Shareholder value |
| |
ü |
Recognizes NEOs’ contributions to Company success and is a retention tool for our executives
|
| Eligibility & participation |
ü |
Non-union employees of TransAlta who, upon the advice of the CEO, are designated as participants by the Board, including the NEOs |
| |
ü |
The Board determines eligibility of individuals to participate in the Stock Option Plan and will determine when, and the circumstances, any individual will be considered to have terminated employment for purposes of the Stock Option Plan |
| |
ü |
Executives terminated without cause can exercise to the extent exercisable on the termination date until the earlier of 60 days and the normal expiry date
|
| Performance period |
Seven years for executive and non-executive grants
|
| Vesting |
Three-year graded vesting for executive and non-executive grants in 2022 and thereafter (three-year cliff vesting for grants made prior to 2022)
|
| Payment |
When exercised
|
| Cash or equity |
Share settled
|
| Shares subject to plan |
ü |
14,500,000 in aggregate |
| |
ü |
When combined with all of the Company’s other security-based compensation, the aggregate number of common shares issued within any one-year period may not exceed 10% of the Company’s total issued and outstanding shares
|
| Exercise price |
Fixed by the Board when an option is granted but such price shall not be less than the last sale price of the common shares on the TSX
|
| Change of control |
Under the Stock Option Plan, if there is a Change of Control (as defined in the Stock Option Plan) the Board may: |
| ü |
Cause any or all outstanding options to vest and be exercisable (either in whole or in part, either immediately or before the date of the change of control); |
| ü |
Cancel any or all outstanding options in exchange for a substitute award; or |
| ü |
Cancel any or all outstanding options in exchange for a substitute award with a value equal to the number of common shares multiplied by the difference, if any, between the exercise price of the option and our closing share price on the TSX on the date of the change of control, provided that if the closing share price on the date of the change of control is not higher than the exercise price of the option then the Board may cancel that option without any payment
|
| |
|
| Assignability |
Options are not transferable or alienable either by assignment or any other manner during the participant’s lifetime but shall enure to the benefit of the participant’s executors or personal representatives if employment is terminated by reason of death
|
| Plan amendments |
The Board may amend the terms of the Stock Option Plan and any options previously granted under the Stock Option Plan, subject to the receipt of all necessary regulatory approvals and the approval of the applicable optionholder. The Board has the discretion to make immaterial amendments that it may deem necessary, without obtaining shareholder approval
|
The Company monitors the outstanding number of
options and common shares (dilution) and the number of options and units issued each year (burn rate). For further details regarding
the number and percentage of outstanding units, please see the section “2021 Executive Compensation Details — Incentive
Plan Awards – Equity Compensation Plan Information” of this circular.
Retirement Plans and Benefits
TransAlta
provides retirement plans and benefits to our executives consistent with the plans offered to all employees of TransAlta. In addition,
NEOs and executives are eligible for a supplemental pension plan and additional life insurance and perquisites as described in the Retirement
Plans, Benefits and Life Insurance section of this circular.
| | TransAlta Corporation | 2022 Management Proxy Circular | 92 |
2021 Executive Performance
John Kousinioris, President and Chief Executive Officer
2021 compensation
| | |
2019 (Realized) | | |
2020 (Realized) | | |
2021 (Realized) | | |
2021 (Target) | | |
2022 (Target) | |
| Base salary(1) | |
$ | 597,656 | | |
$ | 625,000 | | |
$ | 793,750 | | |
$ | 793,750 | | |
$ | 900,000 | |
| AIC | |
$ | 647,207 | | |
$ | 632,813 | | |
$ | 1,396,172 | | |
$ | 754,688 | | |
$ | 900,000 | |
| Long-term incentives(2) | |
| | | |
| | | |
| | | |
| | | |
| | |
| • PSUs | |
$ | 879,888 | | |
$ | 517,819 | | |
$ | 1,859,107 | | |
$ | 1,048,438 | | |
$ | 1,237,500 | |
| • RSUs | |
$ | 228,544 | | |
$ | 215,938 | | |
$ | 533,053 | | |
$ | 476,563 | | |
$ | 562,500 | |
| • Stock options(3) | |
| — | | |
| — | | |
| — | | |
$ | 381,250 | | |
$ | 450,000 | |
| Perquisites/Auto allowance | |
$ | 26,000 | | |
$ | 26,000 | | |
$ | 29,000 | | |
$ | 29,000 | | |
$ | 70,000 | |
| Total direct compensation | |
$ | 2,379,295 | | |
$ | 2,017,570 | | |
$ | 4,611,082 | | |
$ | 3,483,688 | | |
$ | 4,080,000 | |
Notes:
| (1) | Mr. Kousinioris’ 2021 realized and target base salary is pro-rated
from his effective date as President and CEO on April 1, 2021. His 2022 target reflects an increase in his salary from $850,000 to $900,000
effective January 1, 2022. |
| (2) | Mr. Kousinioris’ LTIP target increased from 150% to 200%
in 2020 and to 250% of base salary in 2021 to reflect the increase in his scope and responsibilities as he was promoted to Chief Operating
Officer in 2020 and President and CEO in 2021. |
| (3) | The 2019 stock option grant became exercisable on January 1,
2022. Mr. Kousinioris has not exercised the 2017 stock option grant that became exercisable in 2020. |
2021 Realized Pay Mix
Todd Stack, EVP, Finance & Chief Financial Officer
2021 compensation
| | |
2019 (Realized) | | |
2020 (Realized) | | |
2021 (Realized) | | |
2021 (Target) | | |
2022 (Target) | |
| Base salary(1) | |
$ | 361,310 | | |
$ | 425,000 | | |
$ | 500,000 | | |
$ | 500,000 | | |
$ | 500,000 | |
| AIC | |
$ | 330,413 | | |
$ | 401,625 | | |
$ | 647,500 | | |
$ | 350,000 | | |
$ | 350,000 | |
| Long-term incentives(2) | |
| | | |
| | | |
| | | |
| | | |
| | |
| • PSUs | |
$ | 255,964 | | |
$ | 150,638 | | |
$ | 397,785 | | |
$ | 412,500 | | |
$ | 412,500 | |
| • RSUs | |
$ | 73,138 | | |
$ | 69,100 | | |
$ | 125,450 | | |
$ | 187,500 | | |
$ | 187,500 | |
| • Stock options | |
| — | | |
| — | | |
| — | | |
$ | 150,000 | | |
$ | 150,000 | |
| Perquisites/Auto allowance | |
$ | 20,062 | | |
$ | 26,000 | | |
$ | 26,000 | | |
$ | 26,000 | | |
$ | 26,000 | |
| Total direct compensation | |
$ | 1,040,887 | | |
$ | 1,072,363 | | |
$ | 1,696,735 | | |
$ | 1,626,000 | | |
$ | 1,626,000 | |
Notes:
| (1) | Mr. Stack’s 2019 realized base salary is pro-rated from
his effective date as Chief Financial Officer on May 16, 2019. |
| (2) | Mr. Stack’s LTIP target was increased for 2021 grants
from 125% to 150% of base salary. |
2021 Realized Pay Mix
| | TransAlta Corporation | 2022 Management Proxy Circular | 93 |
Mike Novelli, EVP, Generation
2021 compensation
| | |
2020 (Realized)(1) | | |
2021 (Realized) | | |
2021 (Target) | | |
2022 (Target) | |
| Base salary(2) | |
$ | 286,499 | | |
$ | 475,000 | | |
$ | 475,000 | | |
$ | 495,000 | |
| AIC | |
$ | 230,404 | | |
$ | 615,125 | | |
$ | 332,500 | | |
$ | 346,500 | |
| Long-term incentives | |
| | | |
| | | |
| | | |
| | |
| • PSUs | |
| — | | |
| — | | |
$ | 391,875 | | |
$ | 408,375 | |
| • RSUs | |
| — | | |
| — | | |
$ | 178,125 | | |
$ | 185,625 | |
| • Stock options | |
| — | | |
| — | | |
$ | 142,500 | | |
$ | 148,500 | |
| Signing bonus(3) | |
$ | 375,000 | | |
$ | 225,000 | | |
| — | | |
| — | |
| Other(4) | |
$ | 80,767 | | |
| — | | |
| — | | |
| — | |
| Perquisites/Auto allowance | |
$ | 9,650 | | |
$ | 26,000 | | |
$ | 26,000 | | |
$ | 26,000 | |
| Total direct compensation | |
$ | 1,022,658 | | |
$ | 1,341,125 | | |
$ | 1,546,000 | | |
$ | 1,610,000 | |
Notes:
| (1) | Mr. Novelli was in the US on his start date of May 19, 2020,
and was paid in US dollars until his relocation to Canada on October 1, 2020. His 2020 realized pay reflects both portions (with a foreign
exchange rate of US$ = C$1.34131). |
| (2) | The 2022 target reflects a salary increase from $475,000 to
$495,000 effective January 1, 2022. |
| (3) | Mr. Novelli’s signing bonus includes $200,000 in cash
and $175,000 in common shares in 2020 and $100,000 in cash and $125,000 in common shares in 2021. |
| (4) | “Other” consists of
relocation expenses. |
2021 Realized Pay Mix
Kerry O’Reilly Wilks, EVP, Legal, Commercial & External
Affairs
2021 compensation
| | |
2019 (Realized) | | |
2020 (Realized) | | |
2021 (Realized) | | |
2021 (Target) | | |
2022 (Target) | |
| Base salary(1) | |
$ | 460,000 | | |
$ | 460,000 | | |
$ | 460,000 | | |
$ | 460,000 | | |
$ | 485,000 | |
| AIC | |
$ | 483,000 | | |
$ | 434,700 | | |
$ | 595,700 | | |
$ | 322,000 | | |
$ | 339,500 | |
| Long-term incentives(2) | |
| | | |
| | | |
| | | |
| | | |
| | |
| • PSUs | |
$ | 316,504 | | |
$ | 378,362 | | |
$ | 1,239,405 | | |
$ | 379,500 | | |
$ | 400,125 | |
| • RSUs | |
$ | 90,430 | | |
$ | 173,561 | | |
$ | 355,360 | | |
$ | 172,500 | | |
$ | 181,875 | |
| • Stock options | |
| — | | |
| — | | |
| — | | |
$ | 138,000 | | |
$ | 145,500 | |
| Other(3) | |
$ | 102,353 | | |
$ | 30,265 | | |
$ | 2,780 | | |
| — | | |
| — | |
| Perquisites/auto Allowance | |
$ | 26,000 | | |
$ | 26,000 | | |
$ | 26,000 | | |
$ | 26,000 | | |
$ | 26,000 | |
| Total direct compensation | |
$ | 1,478,287 | | |
$ | 1,502,888 | | |
$ | 2,679,245 | | |
$ | 1,498,000 | | |
$ | 1,578,000 | |
Notes:
| (1) | The 2022 target reflects a salary increase from $460,000 to
$485,000 effective January 1, 2022. |
| (2) | Ms. O’Reilly Wilks’ LTIP target was increased for
2021 grants from 125% to 150% of base salary. |
| (3) | “Other” consists of relocation expenses. |
2021 Realized Pay Mix
| | TransAlta Corporation | 2022 Management Proxy Circular | 94 |
Jane Fedoretz, EVP, People, Talent & Transformation
2021 compensation
| | |
2019 (Realized) | | |
2020 (Realized) | | |
2021 (Realized) | | |
2021 (Target) | | |
2022 (Target) | |
| Base salary(1) | |
$ | 400,000 | | |
$ | 400,000 | | |
$ | 460,000 | | |
$ | 460,000 | | |
$ | 485,000 | |
| AIC | |
$ | 420,000 | | |
$ | 378,000 | | |
$ | 595,700 | | |
$ | 322,000 | | |
$ | 339,500 | |
| Long-term incentives(2) | |
| | | |
| | | |
| | | |
| | | |
| | |
| • PSUs | |
| — | | |
| — | | |
$ | 1,077,747 | | |
$ | 379,500 | | |
$ | 400,125 | |
| • RSUs | |
| — | | |
| — | | |
$ | 309,016 | | |
$ | 172,500 | | |
$ | 181,875 | |
| • Stock options | |
| — | | |
| — | | |
| — | | |
$ | 138,000 | | |
$ | 145,500 | |
| Other | |
| — | | |
$ | 7,692 | | |
| — | | |
| — | | |
| — | |
| Perquisites/Auto allowance | |
$ | 26,000 | | |
$ | 26,000 | | |
$ | 26,000 | | |
$ | 26,000 | | |
$ | 26,000 | |
| Total direct compensation | |
$ | 846,000 | | |
$ | 811,692 | | |
$ | 2,468,462 | | |
$ | 1,498,000 | | |
$ | 1,578,000 | |
Notes:
| (1) | The 2022 target reflects a salary increase from $460,000 to
$485,000 effective January 1, 2022. |
| (2) | Ms. Fedoretz’s LTIP target was increased for 2021 grants from
125% to 150% of base salary. |
2021 Realized Pay Mix
Dawn Farrell, Former President & Chief Executive Officer
2021 compensation
| | |
2019 (Realized) | | |
2020 (Realized) | | |
2021 (Realized) | |
| Base salary (1) | |
$ | 1,000,000 | | |
$ | 1,000,000 | | |
$ | 250,000 | |
| AIC | |
$ | 1,500,000 | | |
$ | 1,350,000 | | |
$ | 462,500 | |
| Recognition bonus(2) | |
| — | | |
| — | | |
$ | 1,000,000 | |
| Long-term incentives | |
| | | |
| | | |
| | |
| • PSUs | |
$ | 3,097,200 | | |
$ | 1,822,723 | | |
$ | 6,035,379 | |
| • RSUs | |
$ | 804,465 | | |
$ | 760,101 | | |
$ | 1,730,494 | |
| • Stock options(3) | |
| — | | |
| — | | |
$ | 3,232,555 | |
| Other | |
| — | | |
| — | | |
$ | 102,697 | |
| Perquisites/Auto allowance | |
$ | 70,000 | | |
$ | 70,000 | | |
$ | 55,000 | |
| Total direct compensation | |
$ | 6,471,665 | | |
$ | 5,002,824 | | |
$ | 12,868,624 | |
Notes:
| (1) | The 2021 realized pay was a pro-rated amount of her annual salary
up until her retirement on March 31, 2021. |
| (2) | Ms. Farrell received a
recognition bonus in 2021 as detailed in the Annual Incentive Compensation section. |
| (3) | Mrs. Farrell exercised
her 2017 (270,833 units) and 2018 (246,338 units) stock option grants in 2021. Ms. Farrell continues to maintain her share ownership
requirement of 5x for one year post-employment. |
2021 Realized Pay Mix
| | TransAlta Corporation | 2022 Management Proxy Circular | 95 |
2021 CEO Realized Pay Analysis
The CEO look-back table below compares, Mr. Kousinioris’s
target compensation for the last year and Ms. Farrell’s target compensation for the four years prior, to their compensation as
reported in the 2021 Executive Compensation Details — Summary Compensation Table, as well as the average realized value
in the 2021 Executive Realized Performance section above, highlighting the at-risk nature of their incentive compensation.
| Year | |
Target compensation(1) | | |
Compensation as reported in the Summary
Compensation Table(2) | | |
Realized compensation(3) | |
| 2021(4) | |
$ | 3,483,688 | | |
$ | 6,509,688 | | |
$ | 4,611,082 | |
| 2020 | |
$ | 4,870,000 | | |
$ | 6,715,214 | | |
$ | 5,002,824 | |
| 2019 | |
$ | 4,870,000 | | |
$ | 6,760,014 | | |
$ | 6,471,665 | |
| 2018 | |
$ | 4,270,000 | | |
$ | 6,175,614 | | |
$ | 4,710,832 | |
| 2017 | |
$ | 4,200,000 | | |
$ | 6,518,416 | | |
$ | 4,465,572 | |
Notes:
| (1) | Target compensation includes base pay, AIC at target performance,
grant value of LTIP awards, and perquisites. |
| (2) | Compensation as reported in the Summary Compensation Table includes
base pay, AIC paid, grant value of LTIP awards, pension and perquisites. |
| (3) | Realized compensation includes base pay, AIC paid, actual exercises
and payouts of LTIP awards, perquisites, and any special awards. |
| (4) | Compensation reported
is solely Mr. Kousinioris’ for 2021 and above is based on his compensation as Chief Operating Officer for three months and the remaining
nine months of the year based on his promotion to President and CEO. |
The following graph shows a three-year look back
at CEO realizable pay and relative TSR performance against companies in our comparator group (see page 101).
As shown by TransAlta’s positioning in the chart, there is a strong alignment between CEO pay and performance over a three-year
period.
Realizable pay includes the three-year average
of base pay, the three-year average of AIC paid, plus the estimated realizable value of LTIP awards granted in the three-year period,
which equals the in-the-money value of stock options plus the current value of full value awards. We used 2018-2020 compensation figures
for TransAlta and 2018-2020 compensation data for the peer companies in our comparator group, as disclosed publicly in their proxy circulars.
| | TransAlta Corporation | 2022 Management Proxy Circular | 96 |
2021 Share Performance & Executive
Pay
The graph and table
below show the total return of $100 invested in TransAlta common shares on December 31, 2016, and assumes reinvestment of dividends,
compared to a similar investment in the S&P/TSX Composite Index over the same period. Also included are the average annual total
compensation levels for the NEOs (as reported in the Summary Compensation Table in prior years). Although TransAlta’s share price
dipped at the end of 2018, it made a quick recovery and realized growth over the following years with strong performance in 2021, closing
at $14.05 on the S&P/TSX Composite Index on December 31, 2021. TransAlta’s executive compensation is aligned with share price
performance as evidenced by the five-year look-back below:
| (at December 31) | |
2016 | | |
2017 | | |
2018 | | |
2019 | | |
2020 | | |
2021 | |
| TransAlta | |
$ | 100 | | |
$ | 102 | | |
$ | 79 | | |
$ | 133 | | |
$ | 141 | | |
$ | 208 | |
| S&P/TSX Composite Index | |
$ | 100 | | |
$ | 109 | | |
$ | 99 | | |
$ | 122 | | |
$ | 129 | | |
$ | 161 | |
| Annual average of NEO compensation as reported in the Summary Compensation Table | |
$ | 3,226,066 | | |
$ | 3,032,575 | | |
$ | 2,838,115 | | |
$ | 3,055,219 | | |
$ | 3,043,104 | | |
$ | 3,676,037 | |
NEOs:
2017: Dawn Farrell, Donald Tremblay, Brett Gellner,
John Kousinioris and Dawn de Lima.
2018: Dawn Farrell, Donald Tremblay, Christophe
Dehout, Brett Gellner, John Kousinioris and Wayne Collins.
2019: Dawn Farrell, Todd Stack, Christophe Dehout,
John Kousinioris, Brett Gellner and Dawn de Lima.
2020: Dawn Farrell, Todd Stack, John Kousinioris,
Brett Gellner and Kerry O’Reilly Wilks.
2021: John
Kousinioris, Todd Stack, Mike Novelli, Kerry O’Reilly Wilks, Jane Fedoretz and Dawn Farrell.
| | TransAlta Corporation | 2022 Management Proxy Circular | 97 |
Compensation Governance
We are committed
to good compensation governance that promotes the long-term interests of Shareholders. The Board has delegated governance of the Company’s
human resource policies and practices to the HRC. Based on an annual risk review conducted by the HRC, the Board believes that our executive
compensation program does not raise TransAlta’s risk profile.
The annual risk
review considers our major risks (equipment/maintenance, capital investments, long-term contracting, market competition and pricing,
energy marketing, growth opportunities, construction and regulatory impact), as well as our compensation philosophy, pay mix, incentive
plans and performance measures, stock-based compensation and our share ownership requirements. The mix of these items, their overall
balance and the caps embedded in our incentive plans are also part of the review.
Compensation Governance & Risk
Management
The following table
highlights our governance and risk management best practices:
| What we do | |
Risk
mitigation | |
Pay for
performance | |
Effective
oversight | |
Shareholder
alignment | |
Attract &
retain |
| Maintain a pay-for-performance philosophy in which most executive compensation is “at-risk” and is based on performance against pre-defined metrics that reflect our strategic priorities | |
| |
ü | |
ü | |
ü | |
ü |
| Incorporate risk management principles into all decision-making processes and ensure our compensation programs do not encourage inappropriate or excessive risk-taking | |
ü | |
| |
ü | |
ü | |
|
| Establish expenditure authority limits for different levels in the organization and any expenditures, new investment programs or projects to be undertaken must be reviewed by a four-member investment committee | |
ü | |
| |
ü | |
| |
|
| Clawback policy (refer to page 87 for additional details) provides for the reimbursement of variable incentive compensation in cases where an executive has engaged in wrongdoing, irrespective of whether there was a restatement of financial statements | |
ü | |
| |
ü | |
ü | |
ü |
Anti-hedging policy prohibits executives and Directors from speculative trading in our shares. Insiders are prohibited from:
• directly or indirectly short selling securities of TransAlta or any of its affiliates where they do not own the underlying security;
• directly or indirectly selling a call or buying a put on our securities or any securities of our affiliates; and
• purchasing financial instruments or engaging in a monetization transaction or other hedging procedure designed to reduce or offset a decrease in the market value of TransAlta securities held by an insider, either directly or indirectly | |
ü | |
| |
| |
ü | |
ü |
| Maintain an HRC of independent directors who have the necessary skills, knowledge and experience to carry out their responsibilities effectively | |
ü | |
| |
ü | |
| |
ü |
| Require the HRC to retain an independent advisor | |
ü | |
| |
ü | |
| |
ü |
| Cap performance factors and payouts under both the AIC Plan and PSUs at 200% to avoid excessive risk-taking | |
ü | |
ü | |
ü | |
| |
|
| Allow executives to convert a portion of their annual bonus to DSUs | |
ü | |
ü | |
| |
ü | |
|
| Annually review our executive compensation program to ensure continued regulatory compliance and alignment with Shareholder interests and sound risk management and governance principles | |
ü | |
| |
ü | |
| |
|
| Set annual targets for the annual and long-term incentive awards within our risk profile and provide sufficient incentive for our executives to achieve the corporate objectives | |
ü | |
ü | |
| |
ü | |
|
| Maintain overlapping performance periods for PSU awards | |
| |
ü | |
| |
ü | |
|
| Benchmark executive compensation and our incentive plans against peer companies similar to TransAlta | |
| |
ü | |
ü | |
ü | |
ü |
| Maintain codes of conduct for our employees, officers and directors to ensure we protect TransAlta’s assets and act ethically and responsibly in everything we do | |
ü | |
| |
ü | |
ü | |
ü |
| Restrict insiders and others who have a special relationship with TransAlta from trading our securities on material undisclosed information or during blackout periods under our insider trading policy and reporting guidelines. Insiders must pre-clear transactions before carrying out a trade in our securities | |
ü | |
| |
ü | |
ü | |
|
| | TransAlta Corporation | 2022 Management Proxy Circular | 98 |
| What we don’t do | |
Risk
mitigation | |
Pay for
performance | |
Effective
oversight | |
Shareholder
alignment | |
Attract &
retain |
| No payouts of incentive awards when performance is below threshold | |
| |
ü | |
ü | |
ü | |
|
| No guaranteed increases in compensation in executive employment agreements | |
ü | |
ü | |
| |
ü | |
|
| No re-pricing, backdating or exchanges of stock options or other long-term incentive awards | |
ü | |
| |
ü | |
ü | |
|
| No gross-up of executive compensation, including perquisites or incentive awards, to account for withholding of taxes | |
ü | |
| |
| |
| |
|
| No counting of PSUs or unvested or unexercised stock options toward share ownership requirements | |
ü | |
| |
| |
ü | |
|
| No single-trigger change of control provisions in employment agreements | |
ü | |
| |
ü | |
ü | |
|
| No hedging of TransAlta securities | |
ü | |
| |
ü | |
ü | |
|
| No granting of loans to directors or executives | |
ü | |
| |
ü | |
ü | |
|
| No granting of stock options to independent directors | |
ü | |
| |
ü | |
ü | |
|
All members of the HRC are independent and their average tenure is
less than five years. The skills and experience of HRC members are noted below:
| Key skills and experience | |
Number of committee members with specific skills or experience(1) |
| Accounting, Finance and Tax | |
2 of 5 |
| Engineering and Technical | |
0 of 5 |
| Government Affairs | |
1 of 5 |
| Legal and Regulatory | |
2 of 5 |
| HR/Compensation | |
3 of 5 |
| Risk Management | |
2 of 5 |
| Electric Energy/Utility | |
1 of 5 |
| Technology/Telecommunications | |
1 of 5 |
| International Operations | |
1 of 5 |
| Environment/Climate Change | |
3 of 5 |
| M&A/Organizational Change | |
4 of 5 |
Note:
| (1) | Represents the top four competencies of each member of the HRC
as identified by such member (the top four competencies are not exclusive and members may hold expertise in an area that is not identified
as one of their top four competencies). Ms. Park was appointed a member of the HRC on May 4, 2021. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 99 |
Independent Advice
The HRC has retained Farient since July 2018,
to provide independent advice regarding TransAlta’s compensation strategy and program, and to advise on all matters related to executive
compensation. The HRC considers the following factors in evaluating the independence of an advisor:
| · | Any business or personal relationship between a member of
the HRC or TransAlta’s executive team and the advisor; |
| · | The scope, if any, of other services provided by the advisor
to TransAlta; and |
| · | The policies and procedures of the advisor
that are designed to prevent conflicts of interest. |
The HRC confirms the independence of its advisor,
Farient, every year and reviews whether the work provided raises any conflicts of interest. The Board of Directors and the HRC pre-approve
any services performed by Farient and any affiliates for the Company.
Since 2019, management has retained Mercer on
a fee-for-service basis for executive compensation work. Management approves Mercer’s fees.
The table below shows the fees, in Canadian dollars,
paid in 2020 and 2021 to the Company’s independent external compensation advisors, Farient and Mercer, for executive compensation-related
work.
| Executive compensation-related fees | |
2021 | | |
2020 | |
| Farient(1) | |
$ | 164,401 | | |
$ | 242,638 | |
| Mercer | |
$ | 164,030 | | |
$ | 156,259 | |
| Total | |
$ | 328,431 | | |
$ | 398,897 | |
Note:
| (1) | Farient fees were invoiced
in US dollars and are calculated above using the average annual foreign exchange rate of US$1 = C$1.25371 for 2021 and a foreign exchange
rate of US$1 = C$1.34131 for 2020. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 100 |
Benchmarking Executive Compensation
Target compensation is set at the 50th
percentile of an industry comparator group using market data collected by external independent consulting firms. The HRC reviews the
compensation data to determine the competitiveness of base pay, incentive pay and plan design, and overall compensation levels relative
to our compensation strategy.
The data includes a cross-section of Canadian
and US companies in the energy industry that have a similar business model and revenue size, and companies with which we compete for
executive talent.
Total compensation
is benchmarked to similar roles in the comparator group, and total target compensation is set within a competitive range (+/-20%) of
the median of the group. For US companies, we assume a nominal exchange rate to remove the effects of exchange rate fluctuations.
In 2021, the HRC approved the addition of Boralex
Inc. to the industry comparator group. Boralex is a Canadian renewable energy generation company operating in multiple countries that
has grown in revenue size. Although Boralex is smaller and less complex than TransAlta, it met our criteria to be added to our Canadian-based
comparator group in 2021.
TransAlta’s 2021 executive compensation
comparator group includes:
Canadian-based Companies
(weighted 75%)
| |
US-based Companies
(weighted 25%)
|
| Algonquin Power & Utilities Corp. |
|
Alliant Energy Corp. |
| AltaGas Ltd. |
|
Avista Corp. |
| ATCO Ltd. |
|
Black Hills Corp. |
| Boralex Inc. |
|
Clearway Energy, Inc. |
| Brookfield Renewable Partners LP |
|
OGE Energy Corp. |
| Capital Power Corp. |
|
Pinnacle West Capital Corp. |
| Emera Inc. |
|
PNM Resources Inc. |
| Fortis Inc. |
|
Portland General Electric |
| Innergex Renewable Energy |
|
|
| Inter Pipeline Ltd. |
|
|
| Keyera Corp. |
|
|
| Northland Power Inc. |
|
|
| Pembina Pipeline Corp. |
|
|
| TC Energy Corporation |
|
|
| | TransAlta Corporation | 2022 Management Proxy Circular | 101 |
Disciplined Decision-Making Process
Compensation program design and decision-making
involves senior management, the HRC and the Board with the benefit of advice from the Board’s external independent compensation
advisor.
| Reviews
and analyzes current compensation strategy |
Reviews
management’s recommendations |
Considers
recommendations from the HRC, its advisors and management |
| Reviews
input from the HRC’s independent compensation advisor |
Considers
comparative data, benchmarking and the advice of its independent compensation advisor |
Considers
corporate objectives and strategy |
| Reviews
peer corporation compensation strategies and provides recommendations to the HRC |
Reviews
the design and metrics for the short and long-term incentive plans to make sure they align with strategic priorities |
Reviews
the current market conditions |
| |
Reviews
stress testing and back testing of the factors that make up the annual corporate budget and different scenarios under the incentive
plans to make sure the targets and any proposed changes result in the intended outcomes |
Reviews
Company performance and makes its final decisions regarding the CEO’s compensation and all equity compensation awards |
| |
Evaluates
the Company’s and management’s performance at the end of the year and makes compensation recommendations to the Board |
Exercises
discretion sparingly and in extraordinary circumstances where unforeseen circumstances cause formula-driven compensation decisions
to be inappropriate, including: one-time circumstances out of management’s control, such as major regulatory changes; changes
to the strategic direction of the Company; and unanticipated and exceptional impacts to the peer group that, in turn, affect the
calculation of comparative results |
| | TransAlta Corporation | 2022 Management Proxy Circular | 102 |
NEO Share Ownership
In our view, executives and Board members must
have a meaningful equity stake in the Company to align their long-term interests with those of our Shareholders. To support share ownership,
TransAlta has a share ownership guideline in place that require our NEOs to hold common shares of TransAlta equal to a specified multiple
of their salary, as noted in the table below.
The Board and the HRC will consider all relevant
factors and take an appropriate course of action to uphold the efficacy of the guidelines. The HRC reviews our share ownership requirements
annually to ensure consistency with market practice.
Ownership requirements vary by level, and NEOs
and other executives must meet the required level of share ownership within a reasonable period. Unvested PSUs and stock options are
not counted towards meeting the guidelines of equity ownership since they are considered “at-risk” pay. RSUs are included
since there is an implied guaranteed payout upon vesting and we consider them as part of the ownership requirements up front. In 2020,
we commenced share settling for both PSUs and RSUs. Pursuant to the share ownership requirements, the NEOs and other executives may not
sell their common shares until they have met their respective share ownership guidelines.
The following table shows the share ownership
for each NEO, using the 20-day VWAP for the 20 trading days prior to and including December 31, 2021, of $13.68:
| Name | |
Ownership
requirement
(multiple of
base pay) | |
Number
of
equity
securities
required | | |
Current
holdings | | |
Value
of
current
holdings | | |
Current
multiple of
holdings | |
Compliance
with policy | |
Hold
period
after leaving
TransAlta |
John
Kousinioris President
and Chief Executive Officer | |
5x | |
| 310,673 | | |
| 319,907 | | |
$ | 4,376,328 | | |
5.15x | |
Yes | |
1 year |
Todd
Stack EVP,
Finance & Chief Financial Officer | |
3x | |
| 109,649 | | |
| 102,172 | | |
$ | 1,397,713 | | |
2.80x | |
On
track(1) | |
— |
Mike
Novelli EVP,
Generation | |
3x | |
| 104,167 | | |
| 67,638 | | |
$ | 925,288 | | |
1.95x | |
On
track(1) | |
— |
Kerry
O’Reilly Wilks EVP,
Legal, Commercial & External Affairs | |
3x | |
| 100,877 | | |
| 142,406 | | |
$ | 1,948,114 | | |
4.24x | |
Yes | |
— |
Jane
Fedoretz EVP,
People, Talent and Transformation | |
3x | |
| 100,877 | | |
| 73,263 | | |
$ | 1,002,238 | | |
2.18x | |
On
track(1) | |
— |
Dawn
Farrell Former
President and Chief Executive Officer | |
5x | |
| 365,497 | | |
| 1,293,207 | | |
$ | 17,691,072 | | |
17.69x | |
Yes | |
1 year |
Note:
| (1) | On track to meet guidelines within a reasonable time frame given
LTIP grant target levels and share divestment restrictions. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 103 |
2021 Executive Compensation Details
Summary Compensation Table
The table below sets out the annual compensation
received by our NEOs for our financial years ending December 31, 2021, 2020 and 2019:
| Name and principal position | |
Year | | |
Salary | | |
Share-based
awards | | |
Option-based
awards | | |
Non-equity
incentive plan
compensation | | |
Pension
value | | |
All other
compensation | | |
Total
compensation | |
John
Kousinioris(1)
President & Chief Executive Officer | |
| 2021 | | |
$ | 793,750 | | |
$ | 1,525,000 | | |
$ | 381,250 | | |
$ | 1,396,172 | (2) | |
$ | 2,371,145 | | |
$ | 42,371 | | |
$ | 6,509,688 | |
| |
| 2020 | | |
$ | 625,000 | | |
$ | 1,000,000 | | |
$ | 250,000 | | |
$ | 632,813 | | |
$ | 422,500 | | |
$ | 32,147 | | |
$ | 2,962,460 | |
| |
| 2019 | | |
$ | 597,656 | | |
$ | 833,041 | | |
$ | 172,500 | | |
$ | 647,207 | | |
$ | 485,300 | | |
$ | 32,147 | | |
$ | 2,767,851 | |
Todd
Stack(3)
EVP, Finance & Chief Financial Officer | |
| 2021 | | |
$ | 500,000 | | |
$ | 600,000 | | |
$ | 150,000 | | |
$ | 647,500 | | |
$ | 45,081 | | |
$ | 33,139 | | |
$ | 1,975,720 | |
| |
| 2020 | | |
$ | 425,000 | | |
$ | 425,000 | | |
$ | 106,250 | | |
$ | 401,625 | | |
$ | 37,213 | | |
$ | 33,734 | | |
$ | 1,428,822 | |
| |
| 2019 | | |
$ | 361,310 | | |
$ | 381,812 | | |
$ | 55,271 | | |
$ | 330,413 | | |
$ | 24,263 | | |
$ | 20,062 | | |
$ | 1,173,131 | |
Mike
Novelli(4)
EVP, Generation | |
| 2021 | | |
$ | 475,000 | | |
$ | 570,000 | | |
$ | 142,500 | | |
$ | 615,125 | | |
$ | 37,287 | | |
$ | 312,028 | | |
$ | 2,151,940 | |
| |
| 2020 | | |
$ | 286,499 | | |
$ | 353,525 | | |
$ | 88,381 | | |
$ | 270,742 | | |
$ | 13,477 | | |
$ | 477,770 | | |
$ | 1,490,393 | |
| |
| 2019 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Kerry O’Reilly Wilks
EVP, Legal, Commercial & External Affairs | |
| 2021 | | |
$ | 460,000 | | |
$ | 552,000 | | |
$ | 138,000 | | |
$ | 595,700 | | |
$ | 44,735 | | |
$ | 33,940 | | |
$ | 1,824,375 | |
| |
| 2020 | | |
$ | 460,000 | | |
$ | 460,000 | | |
$ | 115,000 | | |
$ | 434,700 | | |
$ | 47,150 | | |
$ | 61,425 | | |
$ | 1,578,275 | |
| |
| 2019 | | |
$ | 460,000 | | |
$ | 575,000 | | |
$ | 115,000 | | |
$ | 483,000 | | |
$ | 25,512 | | |
$ | 130,503 | | |
$ | 1,789,015 | |
Jane Fedoretz
EVP, People, Talent & Transformation | |
| 2021 | | |
$ | 460,000 | | |
$ | 552,000 | | |
$ | 138,000 | | |
$ | 595,700 | | |
$ | 41,900 | | |
$ | 30,779 | | |
$ | 1,818,379 | |
| |
| 2020 | | |
$ | 400,000 | | |
$ | 400,000 | | |
$ | 100,000 | | |
$ | 378,000 | | |
$ | 37,667 | | |
$ | 38,471 | | |
$ | 1,354,138 | |
| |
| 2019 | | |
$ | 400,000 | | |
$ | 460,000 | | |
$ | 100,000 | | |
$ | 420,000 | | |
$ | 23,194 | | |
$ | 29,186 | | |
$ | 1,432,379 | |
Dawn
Farrell(5)
Former President and Chief Executive Officer | |
| 2021 | | |
$ | 250,000 | | |
$ | 2,240,000 | | |
$ | 560,000 | | |
$ | 1,462,500 | (6) | |
$ | 3,102,245 | (7) | |
$ | 161,375 | | |
$ | 7,776,120 | |
| |
| 2020 | | |
$ | 1,000,000 | | |
$ | 2,240,000 | | |
$ | 560,000 | | |
$ | 1,350,000 | | |
$ | 1,480,500 | | |
$ | 84,714 | | |
$ | 6,715,214 | |
| |
| 2019 | | |
$ | 1,000,000 | | |
$ | 2,240,000 | | |
$ | 560,000 | | |
$ | 1,500,000 | | |
$ | 1,375,300 | | |
$ | 84,714 | | |
$ | 6,760,014 | |
Notes:
| (1) | Mr. Kousinioris’ salary
is reflective of his salary earned as Chief Operating Officer and President and Chief Executive Officer in 2021 and is reflective of
his salary earned as Chief Growth Officer and Chief Operating Officer in 2019. |
| (2) | Mr. Kousinioris elected to receive 10% of his 2021 AIC in the
form of DSUs. $1,256,555 will be received in cash and $139,617 will be received in DSUs. |
| (3) | Mr. Stack’s salary is
reflective of his salary earned as Managing Director & Corporate Controller and Chief Financial Officer in 2019. |
| (4) | Mr. Novelli’s salary in
2020 is reflective of his time in the US paid in US dollars before his move to Canada and was converted at a the average 2020 foreign
exchange rate of US$1 = C$1.34131. Mr. Novelli’s 2021 “all other compensation” includes a sign-on bonus paid partially in cash
and partially in shares, car allowance and relocation and family benefits allowance. |
| (5) | Ms. Farrell commenced
receiving $6,580 per month starting March 1, 2020, as an old supplemental pension plan benefit owed from her previous service with TransAlta
as a deferred member, which is not included in this table. |
| (6) | Ms. Farrell’s “non-equity incentive plan compensation’
includes a $1,000,000 recognition bonus paid in cash in 2021 in addition to her AIC. This recognition bonus is not pensionable. Please
refer to the Annual Incentive Compensation section for additional details. |
| (7) | Of the pension value for
Ms. Farrell, as per her employment agreement, the value of DB SPP enhancements earned at her retirement, is $2,778,000, DB SPP current
service is $311,100 and the DC pension is $13,145. Refer to the Retirement Plans
section for further details. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 104 |
Definitions & Considerations
Salary increases
| · | 2021: Mr. Kousinioris’
salary increased from $625,000 to $850,000 upon his promotion to President and CEO. Mr. Stack’s salary increased from $425,000 to $500,000
and Ms. Fedoretz’s salary increased from $400,000 to $460,000. |
| · | 2020: No salary increases provided. |
| · | 2019: Mr. Kousinioris’ salary
increased from $575,000 to $625,000 upon his promotion to Chief Operating Officer. Mr. Stack’s
salary increased from $256,288 to $425,000 upon his promotion to Chief Financial Officer. |
Share-based awards: Total grant date fair
value of units awarded under the long-term incentive plan.
| · | 2021: Grants made on January 1, 2021, using the $9.67
closing share price of our common shares on the TSX on the last trading day before the grant date. |
| · | 2020: Grants made on January 1, 2020, using the $9.28
closing share price of our common shares on the TSX on the last trading day before the grant date. |
| · | 2019: Grants made on January 1,
2019, using the $5.59 closing share price of our common shares on the TSX on the last trading
day before the grant date. |
This method of determining the award value has
been used as it represents the dollar value approved by the HRC or the Board, as applicable.
Option-based awards: Total grant date
fair value of stock options granted under the long-term incentive plan. To align with best case market practice, we use the BSV method
to value option awards and determine the number of options to be granted. The table below shows the assumptions used to calculate the
fair value of the 2021, 2020 and 2019 awards:
| | |
Grant date | |
Grant price | | |
Risk-free rate | | |
Dividend yield | | |
Value per option | | |
Option value as (%)
of grant price(1) | |
| 2021 | |
01-Jan-21 | |
$ | 9.67 | | |
| 0.48 | % | |
| 1.76 | % | |
$ | 2.69 | | |
| 28 | % |
| 2020 | |
01-Jan-20 | |
$ | 9.28 | | |
| 1.68 | % | |
| 1.72 | % | |
$ | 2.42 | | |
| 26 | % |
| 2019 | |
01-Jan-19 | |
$ | 5.59 | | |
| 1.90 | % | |
| 2.86 | % | |
$ | 1.19 | | |
| 21 | % |
Note:
| (1) | If the calculated option value is 12% below our common share
price at the time of grant, we will use a fixed option value of 12% of the common share price. This feature is to ensure we do not grant
an inappropriate number of options during a period of extreme share price volatility. |
Non-equity incentive plans: Cash bonuses
for annual performance represent payments made under the AIC program and any other cash bonus payments. if applicable.
Pension value: Sum of the compensatory
amounts related to the defined benefit or defined contribution pension plan as applicable, and the supplemental pension plan.
All other compensation: Amounts are for
car allowances and annual perquisite allowances. These amounts also include the cost of additional life insurance over and above the
Company’s standard benefits package. For 2021:
| · | Mr. Novelli received a sign-on bonus in cash of $100,000 and
$125,000 in common shares, and $55,092 family benefit allowance; |
| · | Ms. O’Reilly Wilks received $2,780 relocation allowance; and |
| · | Ms. Farrell received $40,119 in vacation pay, $52,578 in DC
pension enhancement contributions, and $10,000 outplacement in connection with her retirement, per Ms. Farrell’s employment agreement. |
The additional life insurance amounts for each
NEO are listed below:
| Name | |
2021 | | |
2020 | | |
2019 | |
| John Kousinioris | |
$ | 13,371 | | |
$ | 6,147 | | |
$ | 6,147 | |
| Todd Stack | |
$ | 7,139 | | |
$ | 7,734 | | |
| — | |
| Mike Novelli | |
$ | 5,936 | | |
| — | | |
| — | |
| Kerry O’Reilly Wilks | |
$ | 5,160 | | |
$ | 5,160 | | |
$ | 2,150 | |
| Jane Fedoretz | |
$ | 4,779 | | |
$ | 4,779 | | |
$ | 3,186 | |
| Dawn Farrell | |
$ | 3,678 | | |
$ | 14,714 | | |
$ | 14,714 | |
| | TransAlta Corporation | 2022 Management Proxy Circular | 105 |
Incentive Plan Awards
Outstanding Option and Share Awards
The table below shows all outstanding equity-based
compensation granted to the NEOs as at December 31, 2021:
| |
|
|
|
Option-based awards |
|
|
Share-based awards |
|
| |
|
|
|
Number of
securities
underlying
unexercised |
|
|
Option
exercise |
|
|
Option
expiration |
|
|
Value of
unexercised
in-the-
money |
|
|
Number of shares or units
of
shares that have not vested(2) |
|
|
Market or payout value
of share-
based awards that have not vested(3) |
|
|
Market or
payout
value of
vested
share-
based
awards not
paid out or |
|
| Name |
|
Grant Date |
|
options |
|
|
price |
|
|
date |
|
|
options(1) |
|
|
PSUs |
|
|
RSUs |
|
|
DSUs |
|
|
PSUs |
|
|
RSUs |
|
|
DSUs |
|
|
distributed |
|
| John Kousinioris |
|
06/14/2021 |
|
|
36,793 |
|
|
$ |
11.84 |
|
|
|
01/01/2028 |
|
|
$ |
82,049 |
|
|
|
30,588 |
|
|
|
13,904 |
|
|
|
— |
|
|
$ |
430,369 |
|
|
$ |
195,623 |
|
|
|
— |
|
|
|
— |
|
| |
01/01/2021 |
|
|
92,892 |
|
|
$ |
9.67 |
|
|
|
01/01/2028 |
|
|
$ |
408,723 |
|
|
|
71,866 |
|
|
|
32,666 |
|
|
|
— |
|
|
$ |
1,011,151 |
|
|
$ |
459,614 |
|
|
|
— |
|
|
|
— |
|
| |
01/01/2020 |
|
|
103,445 |
|
|
$ |
9.28 |
|
|
|
01/01/2027 |
|
|
$ |
495,502 |
|
|
|
76,443 |
|
|
|
34,747 |
|
|
|
— |
|
|
$ |
1,075,550 |
|
|
$ |
488,886 |
|
|
|
— |
|
|
|
— |
|
| |
08/13/2019 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
17,484 |
|
|
|
— |
|
|
|
— |
|
|
$ |
245,999 |
|
|
|
— |
|
|
|
— |
|
| |
01/01/2019 |
|
|
145,180 |
|
|
$ |
5.59 |
|
|
|
01/01/2026 |
|
|
$ |
1,231,123 |
|
|
|
147,966 |
|
|
|
40,516 |
|
|
|
— |
|
|
$ |
2,081,878 |
|
|
$ |
570,065 |
|
|
|
— |
|
|
|
— |
|
| |
01/01/2018 |
|
|
69,982 |
|
|
$ |
7.45 |
|
|
|
01/01/2025 |
|
|
$ |
463,281 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
03/07/2017 |
|
|
76,941 |
|
|
$ |
7.25 |
|
|
|
03/07/2024 |
|
|
$ |
524,738 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
02/23/2016 |
|
|
112,273 |
|
|
$ |
5.93 |
|
|
|
02/23/2023 |
|
|
$ |
913,902 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Total |
|
|
|
|
637,506 |
|
|
|
|
|
|
|
|
|
|
$ |
4,119,318 |
|
|
|
326,863 |
|
|
|
139,317 |
|
|
|
— |
|
|
$ |
4,598,948 |
|
|
$ |
1,960,187 |
|
|
|
— |
|
|
|
— |
|
| Todd Stack |
|
01/01/2021 |
|
|
55,735 |
|
|
$ |
9.67 |
|
|
|
01/01/2028 |
|
|
$ |
245,234 |
|
|
|
43,119 |
|
|
|
19,600 |
|
|
|
— |
|
|
$ |
606,690 |
|
|
$ |
275,768 |
|
|
|
— |
|
|
|
— |
|
| |
01/01/2020 |
|
|
43,964 |
|
|
$ |
9.28 |
|
|
|
01/01/2027 |
|
|
$ |
210,588 |
|
|
|
32,488 |
|
|
|
14,767 |
|
|
|
— |
|
|
$ |
457,109 |
|
|
$ |
207,777 |
|
|
|
— |
|
|
|
— |
|
| |
08/13/2019 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,754 |
|
|
|
— |
|
|
|
— |
|
|
$ |
109,095 |
|
|
|
— |
|
|
|
— |
|
| |
05/21/2019 |
|
|
24,994 |
|
|
$ |
8.80 |
|
|
|
05/21/2026 |
|
|
$ |
131,717 |
|
|
|
14,456 |
|
|
|
5,257 |
|
|
|
— |
|
|
$ |
203,390 |
|
|
$ |
73,961 |
|
|
|
— |
|
|
|
— |
|
| |
01/01/2019 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
31,660 |
|
|
|
9,536 |
|
|
|
— |
|
|
$ |
445,451 |
|
|
$ |
134,172 |
|
|
|
— |
|
|
|
— |
|
| |
2016/03/17 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,761 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
52,917 |
|
| |
2015/03/31 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,146 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
44,258 |
|
| Total |
|
|
|
|
124,693 |
|
|
|
|
|
|
|
|
|
|
$ |
587,539 |
|
|
|
121,723 |
|
|
|
56,914 |
|
|
|
6,907 |
|
|
$ |
1,712,640 |
|
|
$ |
800,773 |
|
|
|
— |
|
|
$ |
97,175 |
|
| Mike Novelli |
|
01/01/2021 |
|
|
52,948 |
|
|
$ |
9.67 |
|
|
|
01/01/2028 |
|
|
$ |
232,972 |
|
|
|
40,963 |
|
|
|
18,620 |
|
|
|
— |
|
|
$ |
576,356 |
|
|
$ |
261,980 |
|
|
|
— |
|
|
|
— |
|
| |
05/19/2020 |
|
|
47,082 |
|
|
$ |
7.50 |
|
|
|
01/01/2028 |
|
|
$ |
309,326 |
|
|
|
33,236 |
|
|
|
15,107 |
|
|
|
— |
|
|
$ |
467,628 |
|
|
$ |
212,558 |
|
|
|
— |
|
|
|
— |
|
| Total |
|
|
|
|
100,030 |
|
|
|
|
|
|
|
|
|
|
$ |
542,298 |
|
|
|
74,199 |
|
|
|
33,727 |
|
|
|
— |
|
|
$ |
1,043,984 |
|
|
$ |
474,538 |
|
|
|
— |
|
|
|
— |
|
| Kerry O’Reilly Wilks |
|
01/01/2021 |
|
|
51,276 |
|
|
$ |
9.67 |
|
|
|
01/01/2028 |
|
|
$ |
225,615 |
|
|
|
39,670 |
|
|
|
18,032 |
|
|
|
— |
|
|
$ |
558,155 |
|
|
$ |
253,707 |
|
|
|
— |
|
|
|
— |
|
| |
01/01/2020 |
|
|
47,585 |
|
|
$ |
9.28 |
|
|
|
01/01/2027 |
|
|
$ |
227,931 |
|
|
|
35,164 |
|
|
|
15,983 |
|
|
|
— |
|
|
$ |
494,753 |
|
|
$ |
224,888 |
|
|
|
— |
|
|
|
— |
|
| |
08/13/2019 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,987 |
|
|
|
— |
|
|
|
— |
|
|
$ |
196,799 |
|
|
|
— |
|
|
|
— |
|
| |
01/01/2019 |
|
|
96,786 |
|
|
$ |
5.59 |
|
|
|
01/01/2026 |
|
|
$ |
820,749 |
|
|
|
98,644 |
|
|
|
27,011 |
|
|
|
— |
|
|
$ |
1,387,919 |
|
|
$ |
380,044 |
|
|
|
— |
|
|
|
— |
|
| Total |
|
|
|
|
195,647 |
|
|
|
|
|
|
|
|
|
|
$ |
1,274,295 |
|
|
|
173,478 |
|
|
|
75,013 |
|
|
|
— |
|
|
$ |
2,440,827 |
|
|
$ |
1,055,438 |
|
|
|
— |
|
|
|
— |
|
| Jane Fedoretz |
|
01/01/2021 |
|
|
51,276 |
|
|
$ |
9.67 |
|
|
|
01/01/2028 |
|
|
$ |
225,615 |
|
|
|
39,670 |
|
|
|
18,032 |
|
|
|
— |
|
|
$ |
558,155 |
|
|
$ |
253,707 |
|
|
|
— |
|
|
|
— |
|
| |
01/01/2020 |
|
|
41,378 |
|
|
$ |
9.28 |
|
|
|
01/01/2027 |
|
|
$ |
198,201 |
|
|
|
30,577 |
|
|
|
13,899 |
|
|
|
— |
|
|
$ |
430,220 |
|
|
$ |
195,555 |
|
|
|
— |
|
|
|
— |
|
| |
08/13/2019 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,298 |
|
|
|
— |
|
|
|
— |
|
|
$ |
102,678 |
|
|
|
— |
|
|
|
— |
|
| |
01/01/2019 |
|
|
84,162 |
|
|
$ |
5.59 |
|
|
|
01/01/2026 |
|
|
$ |
713,694 |
|
|
|
85,777 |
|
|
|
23,488 |
|
|
|
— |
|
|
$ |
1,206,886 |
|
|
$ |
330,473 |
|
|
|
— |
|
|
|
— |
|
| Total |
|
|
|
|
176,816 |
|
|
|
|
|
|
|
|
|
|
$ |
1,137,510 |
|
|
|
156,024 |
|
|
|
62,717 |
|
|
|
— |
|
|
$ |
2,195,261 |
|
|
$ |
882,413 |
|
|
|
— |
|
|
|
— |
|
| Dawn Farrell |
|
01/01/2021 |
|
|
208,077 |
|
|
$ |
9.67 |
|
|
|
01/01/2028 |
|
|
$ |
915,540 |
|
|
|
160,979 |
|
|
|
73,172 |
|
|
|
— |
|
|
$ |
2,264,978 |
|
|
$ |
1,029,536 |
|
|
|
— |
|
|
|
— |
|
| |
01/01/2020 |
|
|
231,717 |
|
|
$ |
9.28 |
|
|
|
01/01/2027 |
|
|
$ |
1,109,924 |
|
|
|
171,232 |
|
|
|
77,833 |
|
|
|
— |
|
|
$ |
2,409,231 |
|
|
$ |
1,095,105 |
|
|
|
— |
|
|
|
— |
|
| |
01/01/2019 |
|
|
471,308 |
|
|
$ |
5.59 |
|
|
|
01/01/2026 |
|
|
$ |
3,996,689 |
|
|
|
480,353 |
|
|
|
131,531 |
|
|
|
— |
|
|
$ |
6,758,562 |
|
|
$ |
1,850,647 |
|
|
|
— |
|
|
|
— |
|
| |
02/23/2016 |
|
|
165,977 |
|
|
$ |
5.93 |
|
|
|
02/23/2023 |
|
|
$ |
1,351,053 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
2017/03/07 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
130,342 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
1,833,918 |
|
| |
2016/03/17 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
145,885 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
2,052,598 |
|
| |
2015/03/31 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
115,758 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
1,628,719 |
|
| |
2014/04/01 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
42,902 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
603,633 |
|
| |
|
|
|
1,077,079 |
|
|
|
|
|
|
|
|
|
|
$ |
7,373,206 |
|
|
|
812,564 |
|
|
|
282,536 |
|
|
|
434,888 |
|
|
$ |
11,432,771 |
|
|
$ |
3,975,288 |
|
|
|
— |
|
|
$ |
6,118,868 |
|
| Total |
|
|
|
|
2,311,771 |
|
|
|
|
|
|
|
|
|
|
$ |
15,034,166 |
|
|
|
1,664,851 |
|
|
|
650,224 |
|
|
|
441,794 |
|
|
$ |
23,424,431 |
|
|
$ |
9,148,637 |
|
|
|
— |
|
|
$ |
6,216,044 |
|
Notes:
| (1) | The value of unexercised in-the-money options equals the difference
between the five-day VWAP of our common shares on the TSX on December 31, 2021 ($14.07), and the option exercise price multiplied by
the number of outstanding vested and unvested stock options. |
| (2) | The number of RSUs and PSUs outstanding, including dividend
equivalents, as of December 31, 2021. |
| (3) | Calculated using $14.07, the five-day VWAP of our common shares
on the TSX on December 31, 2021. PSUs granted in 2020 and 2021 assume a performance factor of 100%. The values for PSUs granted in 2019
reflect a PSU performance factor of 166%. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 106 |
Value Vested During the Year
The table below includes the amount of variable
compensation that vested in 2021, including payments the CEO and other NEOs received in 2021 as a result of vested 2018 PSUs and RSUs,
and cash bonuses on March 15, 2022, for the 2021 performance year:
| Name | |
Option-based awards — Value
vested during the year ($) | | |
Share-based awards — Value
vested during the year ($) | | |
Non-equity incentive plan
compensation — Value earned
during the year ($) | |
| | |
| | |
PSUs | | |
RSUs | | |
| |
| John Kousinioris | |
$ | 461,881 | | |
$ | 517,819 | | |
$ | 215,938 | | |
$ | 1,396,172 | |
| Todd Stack | |
| — | | |
$ | 150,638 | | |
$ | 69,100 | | |
$ | 647,500 | |
| Mike Novelli | |
| — | | |
| — | | |
| — | | |
$ | 615,125 | |
| Kerry O’Reilly Wilks | |
| — | | |
$ | 378,362 | | |
$ | 173,561 | | |
$ | 595,700 | |
| Jane Fedoretz | |
| — | | |
| — | | |
| — | | |
$ | 595,700 | |
| Dawn Farrell | |
$ | 1,625,831 | | |
$ | 1,822,723 | | |
$ | 760,101 | | |
$ | 1,462,500 | |
PSUs granted on January 1, 2018, vested on January
1, 2021 and were paid out on March 15, 2021, at 109% of their grant value. Amounts under
non-equity incentive plans include the AIC under the AIC plan, and any other bonus payments as disclosed in the Summary Compensation
Table.
Total Value of Equity Holdings at Year-End
| Name | |
Shares | | |
RSUs | | |
DSUs | | |
Total | |
| John Kousinioris | |
$ | 2,470,485 | | |
$ | 1,905,843 | | |
| — | | |
$ | 4,376,328 | |
| Todd Stack | |
$ | 524,669 | | |
$ | 778,570 | | |
$ | 94,474 | | |
$ | 1,397,713 | |
| Mike Novelli | |
$ | 463,916 | | |
$ | 461,372 | | |
| — | | |
$ | 925,288 | |
| Kerry O’Reilly Wilks | |
$ | 921,936 | | |
$ | 1,026,178 | | |
| — | | |
$ | 1,948,114 | |
| Jane Fedoretz | |
$ | 144,297 | | |
$ | 857,941 | | |
| — | | |
$ | 1,002,238 | |
| Dawn Farrell | |
$ | 7,876,711 | | |
$ | 3,865,092 | | |
$ | 5,949,268 | | |
$ | 17,691,071 | |
We valued the equity holdings using $13.68 per
common share, the 20-day VWAP of our common shares on the TSX for the 20 trading days prior to and including December 31, 2021. RSU values
include unvested RSUs and vested RSUs that have not yet been paid. All RSUs and DSUs include additional units received as dividend equivalents
according to the terms of the plan. PSUs and stock options are not included as part of the total value of equity holdings as neither
incentive vehicle is used towards meeting share ownership guidelines.
Equity Compensation Plan Information
The Board, on the recommendation of the HRC,
approves PSU, RSU and stock option awards. PSUs, RSUs and options may be granted to employees designated by the Board and are priced
according to the provisions of the Share Unit Plan and the Stock Option Plan. The Share Unit Plan currently provides for a maximum aggregate
of 7,000,000 common shares issuable under the Share Unit Plan, and the Stock Option Plan currently provides for a maximum aggregate of
14,500,000 common shares issuable under the Stock Option Plan.
The table below shows the shares available under
the Company’s Share Unit Plan and Stock Option Plan as of December 31, 2021.
| As at December 31, 2021 | |
Common shares issuable on the exercise of currently issued and outstanding, options,
RSUs and PSUs (a) | | |
Common shares previously issued on exercise of options,
RSUs and PSUs (b) | | |
Total number of common shares available for issuance on the exercise of options,
RSUs and PSUs (c) | | |
Options, RSUs and PSUs available for future grant based on common shares available issuance =
(c) - (a) - (b) | |
| Plans approved by security holders: | |
| | |
| | |
| | |
| |
| Stock Option Plan | |
| 3,216,711 | | |
| 7,652,204 | | |
| 14,500,000 | | |
| 3,631,085 | |
| Share Unit Plan | |
| 4,605,341 | | |
| — | | |
| 7,000,000 | | |
| 2,394,659 | |
| | TransAlta Corporation | 2022 Management Proxy Circular | 107 |
| | |
As of December 31, 2021 (%) | | |
As of December 31, 2020 (%) | | |
As of December 31, 2019 (%) | |
| Current Dilution | |
| | | |
| | | |
| | |
| Stock Option Plan | |
| 1.19 | % | |
| 1.45 | % | |
| 1.33 | % |
| Share Unit Plan(1) | |
| 1.70 | % | |
| —% | | |
| —% | |
| Burn rate | |
| | | |
| | | |
| | |
| Stock Option Plan | |
| 0.26 | % | |
| 0.27 | % | |
| 0.49 | % |
| Share Unit Plan(2) | |
| 0.54 | % | |
| 0.67 | % | |
| 0.83 | % |
| Number of options granted in applicable year | |
| 704,395 | | |
| 740,846 | | |
| 1,382,191 | |
| Number of PSUs and RSUs granted in applicable year | |
| 1,447,750 | | |
| 1,849,215 | | |
| 2,343,087 | |
| Weighted average number of securities outstanding(3) | |
| 270,539,137 | | |
| 274,622,582 | | |
| 282,520,820 | |
Notes:
| (1) | RSUs and PSUs were cash-settled
prior to 2021, resulting in no dilution prior to 2021. |
| (2) | While RSUs and PSUs could
not be settled in common shares from treasury prior to the 2021 amendments of the Share Unit Plan, we have provided the annual historical
burn rate information for context. RSUs and PSUs can now be settled in common shares from treasury under the terms of the Share Unit
Plan. PSUs have a performance factor that will result in a PSU payout between 0-2x. |
| (3) | The weighted average number
of securities outstanding during the period is the number of securities outstanding at the beginning of the period, adjusted by the number
of securities bought back or issued during the period multiplied by a time-weighting factor. The time-weighting factor is the number
of days that the securities are outstanding as a proportion of the total number of days in the period. |
Retirement Plans, Benefits &
Life Insurance
Retirement Plans
All employees, including NEOs and executives,
participate in a defined contribution plan (“DC plan”) registered under the Income Tax Act (Canada) and the Employment
Pension Plans Act (Alberta).
NEOs and executives hired before January 1, 2016,
also participate in a supplemental pension plan (“SPP”), which is a defined benefit, non-registered plan. Those hired after
January 1, 2016, participate in a defined contribution (“DC SPP”), non-registered SPP.
Defined Contribution Plan
We contribute 5% of employees’ pensionable
earnings, defined as 100% of base pay and AIC, to the plan. Contributions are deposited to participants’ accounts and invested
according to their instructions. Effective January 1, 2022, the Company introduced an additional employer matching contribution of up
to 3%, contingent upon on an employee’s voluntary contribution.
Participants are eligible to retire after age
55. They must transfer their account balance (contributions and investment earnings) to an annuity or a life income fund to receive their
retirement payments. If a participant retires from TransAlta but does not want to receive their retirement income yet, or if a participant
leaves the Company before turning 55, they can transfer their account balance to a personal, locked-in account.
In 2021, the maximum annual contribution under
the plan was $26,289 (i.e., 90% of the $29,210 maximum allowed by the Canada Revenue Agency). The table below shows the accumulated value
of contributions to each NEO’s DC Plan as at December 31, 2021:
| Name | |
Accumulated value at start
of year ($) | | |
Compensatory ($) | | |
Non-compensatory ($) | | |
Withdrawal ($) | | |
Accumulated value at year
end ($) | |
| John Kousinioris | |
| 277,525 | | |
| 13,145 | | |
| 74,454 | | |
| — | | |
| 365,124 | |
| Todd Stack | |
| 1,055,558 | | |
| 26,289 | | |
| 248,669 | | |
| — | | |
| 1,330,516 | |
| Mike Novelli(1) | |
| 42,815 | | |
| 26,289 | | |
| 7,392 | | |
| — | | |
| 76,496 | |
| Kerry O’Reilly Wilks | |
| 59,877 | | |
| 26,289 | | |
| 11,085 | | |
| — | | |
| 97,251 | |
| Jane Fedoretz | |
| 60,418 | | |
| 22,456 | | |
| 15,123 | | |
| — | | |
| 97,997 | |
| Dawn Farrell(2) | |
| 519,618 | | |
| 13,145 | | |
| 55,308 | | |
| (588,071 | ) | |
| — | |
Notes:
| (1) | Mr. Novelli has a 401K
value from his employment in the US prior to transferring to Canada. The 401K value is included in the tables above, and was converted
using the average 2021 foreign exchange rate of US$1 = C$1.25371. |
| (2) | Ms. Farrell retired on
March 31, 2021 and her accumulated value at the end of the year was nil. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 108 |
Supplemental Pension Plan
We fund a non-contributory SPP for NEOs and other
executives to provide benefits above the registered pension contribution limits set out under the Income Tax Act (Canada).
For NEOs and other executives hired before January
1, 2016, the SPP provides a defined benefit pension of 2% of the final average pensionable earnings (base pay and AIC) in excess of the
average DC plan pensionable earnings limit for each year of credited service. Final average pensionable earnings are calculated as the
executive’s highest five consecutive year average within the last 10 years, including the annual bonus (no cap).
Participants are eligible to retire after they
turn 55 and complete two years of service, but the SPP amount they receive is based on several factors:
| • | They receive their full monthly pension if they retire after
they turn 60 or if their total years of service plus age, equals 85 or more. |
| • | Their monthly pension is reduced by 5/12 of 1% for each month
that their retirement date precedes their unreduced retirement date. |
| • | Pension payments are increased by
2% per year every January 1 after a participant becomes eligible for an unreduced pension.
The first increase is pro-rated based on the number of months since the member reached the
eligibility date, or the number of months the member has been retired, if less. |
A participant who leaves the Company before turning
55, but after completing two years of service, is eligible to receive a deferred SPP monthly pension.
SPP pensions are payable for life, with guaranteed
payments for five years. If a participant dies after retiring but before the five-year mark, their beneficiary will receive the remaining
pension in the guaranteed period. Participants can choose other terms for their pension, including a 10- or 15-year guarantee and joint
and survivor benefits. US taxpayers are required to receive a commuted value over a specific period according to section 409A of the
US Internal Revenue Code.
The table below shows the estimated value of the SPP for each participating
NEO as of December 31, 2021, and our accrued obligation as of that date:
| | |
Number
of | | |
Annual
benefits payable
($) | | |
Opening
present | | |
| | |
| | |
Closing
present | |
| Name | |
years
credited
service (#) | | |
At
year-end | | |
At
age 65 | | |
value of defined
benefit
obligation
($) | | |
Compensatory
change ($)(1) | | |
Non-compensatory
change ($) | | |
value of defined
benefit
obligation
($) | |
| Dawn Farrell | |
| 13.90 | | |
| — | | |
| — | | |
| 16,002,700 | | |
| 3,089,100 | | |
| 544,200 | | |
| 19,636,000 | |
| John Kousinioris | |
| 9.08 | | |
| 204,000 | | |
| 378,000 | | |
| 3,491,100 | | |
| 2,358,000 | | |
| (56,300 | ) | |
| 5,792,800 | |
| Todd
Stack(2) | |
| 25.50 | | |
| 60,700 | | |
| 60,700 | | |
| 1,442,200 | | |
| — | | |
| (125,500 | ) | |
| 1,316,700 | |
Notes:
| (1) | The compensatory change
for Ms. Farrell includes the value of enhancements earned at her retirement, as per her employment agreement (an additional two years
of credited service), is $2,778,000, plus current service cost of $311,100. |
| (2) | Mr. Stack has a DB SPP
entitlement that was earned prior to his promotion to an executive, and was frozen in January 2016. The amount in the table shows his
unreduced DB obligation at the end of 2021 based on attainment of age 55. He currently participates in the executive DC SPP. |
Values are based on the following assumptions:
| • | 2.8% annual discount rate
(to measure the accrued pension liability at December 31, 2021); |
| • | 3.0% salary increases
before considering the limits on final average earnings; |
| • | Retirement rates based
on our pension plan experience; and |
| • | 2.5%
increase in DC earnings limits (to determine final average pensionable earnings). |
For NEOs and other executives hired on January
1, 2016, or later, the DC SPP provides a defined contribution pension of an additional 5% on the portion of the executive’s pensionable
earnings (base pay and AIC) that is above the maximum allowed under the registered DC Plan.
A participant who leaves the Company before turning
55, but after completing two years of service, is eligible to receive a full accumulated value at the date they retire or terminate employment.
As a non-registered plan, the value is paid out as a lump sum and is taxable income. For a US taxpayer, there are special rules as to
the payment according to section 409A of the US Internal Revenue Code.
| | TransAlta Corporation | 2022 Management Proxy Circular | 109 |
The table below shows the estimated value of the DC SPP for each NEO
as of December 31, 2021, and the accumulated value as of that date:
| Name | |
Accumulated value
at
start of year ($) | | |
Compensatory
($) | | |
Non-compensatory
($) | | |
Withdrawal
($) | | |
Accumulated value at
year end ($) | |
| Todd Stack | |
| 12,507 | | |
| 18,792 | | |
| 1,962 | | |
| — | | |
| 33,261 | |
| Mike Novelli | |
| — | | |
| 10,998 | | |
| 265 | | |
| — | | |
| 11,263 | |
| Kerry O’Reilly Wilks | |
| 25,384 | | |
| 18,446 | | |
| 4,954 | | |
| — | | |
| 48,783 | |
| Jane Fedoretz | |
| 28,805 | | |
| 19,444 | | |
| 2,579 | | |
| — | | |
| 50,828 | |
Benefits & Life Insurance
NEOs and other executives participate in the
same pension and benefits programs as our other employees. Life insurance, disability, medical and dental coverage are included in the
benefits program.
| • | Employees allocate their annual
benefits allowance to the different plan components based on their needs and can receive
enhanced coverage by making contributions through payroll deductions. Flexible health benefits
coverage is offered, and employees elect coverage every two years. |
| • | Basic life insurance covering 2x
base salary is offered, with the option to elect for lower coverage levels. Optional life
insurance is also offered for individuals, spouses, or dependents. |
| • | Additional individual life insurance
policies are provided to executives, and the premiums are included in the Summary Compensation
Table and described in the Definitions and Considerations section, including the
individual annual premiums paid on their behalf. |
| • | The annual perquisite allowance
is in lieu of additional benefits left to the discretion of the NEO and executive as to how
to utilize the funds. The President and CEO receives a $50,000 annual allowance, and the
other NEOs receive a $10,000 allowance, effective on the first of January of each year. No
adjustments were made in 2021 upon the retirement of Dawn Farrell and promotion of John Kousinioris
to President and CEO. |
| • | Automobile allowances are fixed
and based on market practice: |
| Name | |
Auto allowance ($) | | |
Perquisite allowance ($) | |
| John Kousinioris | |
| 19,000 | | |
| 10,000 | |
| Todd Stack | |
| 16,000 | | |
| 10,000 | |
| Mike Novelli | |
| 16,000 | | |
| 10,000 | |
| Kerry O’Reilly Wilks | |
| 16,000 | | |
| 10,000 | |
| Jane Fedoretz | |
| 16,000 | | |
| 10,000 | |
| Dawn Farrell | |
| 5,000 | | |
| 50,000 | |
| | TransAlta Corporation | 2022 Management Proxy Circular | 110 |
Termination & Change of Control
The table below
sets out how each compensation element is treated if an NEO’s employment is terminated.
All NEOs are subject to non-competition clauses
in their agreements if they leave TransAlta. To protect our interests, they cannot promote, engage with, work for or invest in companies
in Alberta that are in a similar business to TransAlta for the severance period outlined in the table below.
| |
|
|
|
|
|
Long-term Incentive |
|
|
|
|
| Event |
|
Salary |
|
AIC |
|
RSUs |
|
PSUs |
|
Stock options |
|
Additional pension value |
|
Benefits |
| Resignation/ Termination for cause |
|
Ends on resignation date |
|
Forfeited |
|
Forfeited |
|
Forfeited |
|
Forfeited |
|
None |
|
None |
| Retirement(1) |
|
Ends on retirement date |
|
Pro-rated to retirement date, payout based on actual
performance
No additional payments |
|
Retirement, unvested units are pro-rated to retirement
date
Enhanced retirement, vest as normal |
|
Retirement, unvested units are pro-rated to retirement
date and paid based on target performance
Enhanced retirement, vest as normal, paid based
on actual performance |
|
Vest as normal, exercisable for up to earlier of 36 months or normal expiry |
|
Enhanced retirement, CEO receives
additional 24 months of pension contributions
Other NEOs receive additional 18 months of pension
contributions |
|
As per TransAlta’s benefits plan |
| Death |
|
Ends on date of death |
|
Pro-rated to date of death, payout based on actual
performance
No additional payments |
|
Vest in full |
|
Vest in full, payout based on target performance |
|
Vest in full, exercisable for one year or normal expiry, whichever comes first |
|
CEO receives
additional 24 months of pension contributions
Other NEOs receive additional 18 months of pension
contributions |
|
As per TransAlta’s benefits plan |
| Termination without cause |
|
CEO
24 months of base salary
Other NEOs
18 months of base salary |
|
Pro-rated to termination date, payout based on
actual performance
plus
AIC for severance period at target performance |
|
Unvested units are pro-rated to termination date |
|
Unvested units are pro-rated to termination date, payout based on target performance |
|
Unvested options are forfeited, vested options are exercisable for 60 days or normal expiry, whichever comes first |
|
Entitled to accrued pension benefits plus the value of pension contributions for the severance period |
|
CEO
22% of Salary
Other NEOs
16% of Salary |
| Double-trigger change of control |
|
CEO
24 months of base salary
Other NEOs
18 months of base salary |
|
Pro-rated to termination date, payout based on
actual performance
plus
AIC for severance period at target performance |
|
Vest in full |
|
Vest in full, payout based on actual performance |
|
Board discretion |
|
Entitled to accrued pension benefits plus the value of pension contributions for the severance period |
|
CEO
22% of Salary
Other NEOs
16% of Salary |
Note:
| (1) | “Retirement” is defined as minimum age 55 and five
years of service and “Enhanced Retirement” is defined as minimum age 60 and 10 years of consecutive service or as defined in
their respective Executive Employment Agreements. |
| | TransAlta Corporation | 2022 Management Proxy Circular | 111 |
The table below shows the incremental amounts
that would have been paid to each NEO if their employment had been terminated at December 31, 2021:
| Name | |
Event | |
Severance
period
(months) | | |
Amount
of
base pay
($) | | |
AIC
($) | | |
Benefits
($) | | |
Additional
pension
value
($) | | |
LTIP(1)
($) | | |
Other(2)
($) | | |
Total
($) | |
| |
Resignation | |
— | | |
— | | |
— | | |
— | | |
— | | |
— | | |
— | | |
— | |
| | |
Retirement(3) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 4,493,824 | | |
| — | | |
| 4,493,824 | |
| John | |
Death | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,432,300 | | |
| 6,559,134 | | |
| — | | |
| 8,991,434 | |
| Kousinioris | |
Termination
without cause | |
| 24 | | |
| 1,700,000 | | |
| 1,700,000 | | |
| 374,000 | | |
| 2,432,300 | | |
| 4,493,824 | | |
| 370,000 | | |
| 11,070,124 | |
| | |
Double trigger
CoC | |
| 24 | | |
| 1,700,000 | | |
| 1,700,000 | | |
| 374,000 | | |
| 2,432,300 | | |
| 6,559,134 | | |
| 370,000 | | |
| 13,135,434 | |
| |
Resignation | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| | |
Retirement(3) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,644,895 | | |
| — | | |
| 1,644,895 | |
| Todd | |
Death | |
| — | | |
| — | | |
| — | | |
| — | | |
| 63750 | | |
| 2,513,413 | | |
| — | | |
| 2,577,163 | |
| Stack(4) | |
Termination
without cause | |
| 18 | | |
| 750,000 | | |
| 525,000 | | |
| 120,000 | | |
| 63,750 | | |
| 1,644,895 | | |
| — | | |
| 3,103,645 | |
| | |
Double trigger
CoC | |
| 18 | | |
| 750,000 | | |
| 525,000 | | |
| 120,000 | | |
| 63,750 | | |
| 2,513,413 | | |
| — | | |
| 3,972,163 | |
| |
Resignation | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| | |
Retirement | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Mike | |
Death | |
| — | | |
| — | | |
| — | | |
| — | | |
| 60,563 | | |
| 1,518,522 | | |
| — | | |
| 1,579,085 | |
| Novelli | |
Termination
without cause | |
| 18 | | |
| 712,500 | | |
| 498,750 | | |
| 114,000 | | |
| 60,563 | | |
| 645,794 | | |
| — | | |
| 2,031,606 | |
| | |
Double trigger
CoC | |
| 18 | | |
| 712,500 | | |
| 498,750 | | |
| 114,000 | | |
| 60,563 | | |
| 1,518,522 | | |
| — | | |
| 2,904,335 | |
| |
Resignation | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| | |
Retirement | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Kerry | |
Death | |
| — | | |
| — | | |
| — | | |
| — | | |
| 58,650 | | |
| 3,496,264 | | |
| — | | |
| 3,554,914 | |
| O’Reilly
Wilks | |
Termination
without cause | |
| 18 | | |
| 690,000 | | |
| 483,000 | | |
| 110,400 | | |
| 58,650 | | |
| 2,674,143 | | |
| — | | |
| 4,016,193 | |
| | |
Double trigger
CoC | |
| 18 | | |
| 690,000 | | |
| 483,000 | | |
| 110,400 | | |
| 58,650 | | |
| 3,496,264 | | |
| — | | |
| 4,838,314 | |
| |
Resignation | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| | |
Retirement | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Jane | |
Death | |
| — | | |
| — | | |
| — | | |
| — | | |
| 58,650 | | |
| 3,077,673 | | |
| — | | |
| 3,136,323 | |
| Fedoretz | |
Termination
without cause | |
| 18 | | |
| 690,000 | | |
| 483,000 | | |
| 110,400 | | |
| 58,650 | | |
| 2,306,094 | | |
| — | | |
| 3,648,144 | |
| | |
Double trigger
CoC | |
| 18 | | |
| 690,000 | | |
| 483,000 | | |
| 110,400 | | |
| 58,650 | | |
| 3,077,673 | | |
| — | | |
| 4,419,723 | |
Notes:
| (1) | “LTIP” PSUs were valued using a target performance
factor with value on December 31, 2021. |
| (2) | “Other” includes legacy payments under previous long-term
incentive plans according to the terms of the NEO’s prior executive employment agreement. |
| (3) | As of December 31, 2021, Mr. Kousinioris and Mr. Stack are eligible
for retirement for LTIP purposes; no NEOs are eligible for enhanced retirement under their executive employment agreement. The retirement
provisions in each applicable Plan document were used in calculating the values above; grant values are pro-rated for time, calculated
using performance from previous quarter. |
| (4) | Mr. Stack has a frozen
DB SPP benefit that is fully vested and eligible no matter what trigger. The value is $1,321,000 as of December 31, 2021, and would be
set up as a monthly pension payable for his lifetime. |
Ms. Farrell’s Retirement
Ms. Farrell retired effective March 31, 2021,
and received her pro-rated AIC payment, continued her vesting rights under the LTIP awards, and received other compensation in accordance
with the retirement provisions of her employment agreement. Ms. Farrell qualified for the enhanced retirement provisions in her employment
agreement, resulting in an additional two years of credited service under the DB SPP pension plan, as disclosed in the Summary
Compensation Table, resulting in an additional pension value of $2,777,000. Further,
under the Stock Option Plan, the normal provision at retirement is that unvested stock options continue to vest in ordinary course, and
all outstanding stock options are exercisable until the earlier of: (i) 36 months following the retirement date; and (ii) the normal
expiry date of the stock option. In recognition of her long and successful career at TransAlta, the Board approved an extension of the
exercise period for Ms. Farrell’s stock options granted in 2020 and 2021, to be exercisable until January 1, 2025, and January 1, 2026,
respectively, effectively adding an additional nine months and 21 months to exercise her stock options. The default under the plan would
have otherwise required an exercise period of only three months for the most recent grants. These extension
periods are prior to the normal expiry date of her 2020 and 2021 stock options.
| | TransAlta Corporation | 2022 Management Proxy Circular | 112 |
Director Approval
The undersigned
hereby certifies that the contents and the sending of this Proxy Circular have been approved by the Board for mailing to the Shareholders
entitled to receive notice of the Meeting, to each director of the Company, to Ernst & Young LLP and to the appropriate governmental
agencies.
| |
By
the order of the Board of Directors |
| |
 |
Calgary, Alberta
March 18, 2022 |
Scott Jeffers
Vice President and Corporate Secretary |
| | TransAlta Corporation | 2022 Management Proxy Circular | 113 |
Appendix “A” – Checklist
of Corporate Governance Disclosure
| 1(a) | |
Identity of directors who are independent (all except for President and Chief Executive Officer (“CEO”)) | |
Majority 11 of 12 |
| 1(b) | |
Identity of non-independent directors | |
CEO (page 25) |
| 1(c) | |
Majority of independent directors | |
Yes |
| 1(d) | |
Identify directors who are also directors of other issuers and name the issuers (none involving our CEO, none involving compensation committee members) | |
See table on page 56 |
| 1(e) | |
Independent directors hold regularly scheduled meetings at which non-independent directors and management are not in attendance | |
Yes |
| 1(f) | |
Independent Chair of the Board | |
Yes |
| 1(g) | |
Attendance record for each director | |
See table on page 34 |
| 2 | |
Disclose text of board’s written mandate | |
See Appendix “B” and at www.transalta.com |
| 3(a) | |
Written position descriptions for chair and chair of each board committee | |
Yes and at www.transalta.com |
| 3(b) | |
Written position description for CEO | |
Yes |
| 4(a) | |
New director orientation | |
Yes: see page 57 |
| 4(b) | |
Continuing education program for directors | |
Yes: see page 57 |
| 5(a) | |
Written code of conduct for directors, officers and employees | |
Yes: see page 46 |
| 5(b) | |
Board ensures directors exercise independent judgment | |
Yes: see page 53 |
| 5(c) | |
Board promotes a culture of ethical business conduct | |
Yes: see page 46 |
| 6(a) | |
Board has process to identify new candidates for board nomination | |
Yes: see page 59 |
| 6(b) | |
Nominating committee composed of entirely independent directors | |
Yes: see page 64 |
| 6(c) | |
Describe responsibilities, powers and operation of nominating committee | |
See page 64 |
| 7(a) | |
Process by which board determines compensation for directors and officers | |
See pages 67 and 81 |
| 7(b) | |
Compensation committee composed of entirely independent directors | |
Yes: see page 65 |
| 7(c) | |
Describe responsibilities, powers and operation of compensation committee | |
See page 65 |
| 8 | |
Identify standing committees other than audit, compensation and nominating and describe their function | |
See page 66 |
| 9 | |
Disclose whether or not the board, committees and individual directors are regularly assessed and describe the process | |
See page 60 |
| 10 | |
Disclose whether or not the issuer has adopted term limits for the directors on its board or other mechanisms of board renewal and, if so, include a description of those director term limits or other mechanisms of board renewal | |
See page 35 |
| 11(a) | |
Disclose whether the issuer has adopted a written policy relating to the identification and nomination of women directors | |
See page 54 |
| 12 | |
Disclose whether and, if so, how the board or nominating committee considers the level of representation of women on the board in identifying and nominating candidates for election or re-election to the board | |
See page 54 |
| 13 | |
Disclose whether and, if so, how the issuer considers the level of representation of women in executive officer positions when making executive officer appointments | |
See page 55 |
| 14(b) | |
Disclose whether the issuer has adopted a target regarding women on the issuer’s board | |
See page 54 |
| 14(c) | |
Disclose whether the issuer has adopted a target regarding women in executive officer positions of the issuer | |
See page 55 |
| 15(a) | |
Disclose the number and proportion (in percentage terms) of directors on the issuer’s board who are women | |
See page 55 |
| 15(b) | |
Disclose the number and proportion (in percentage terms) of executive officers of the issuer, including all major subsidiaries of the issuer, who are women | |
See page 55 |
| | TransAlta Corporation | 2022 Management Proxy Circular | 1 |
New York Stock Exchange – Significant Differences in Corporate
Governance Practices
Compliance with NYSE Standards
The Company is subject to a variety of corporate
governance guidelines and requirements enacted by the Toronto Stock Exchange (“TSX”), the Canadian securities regulatory authorities,
the New York Stock Exchange (“NYSE”) and the SEC. The Company is listed on the NYSE and, although the Company is not required
to comply with most of the NYSE corporate governance requirements to which the Company would be subject if it were a US corporation,
the Company’s governance practices differ from those required of US domestic issuers in only the following respects. The NYSE rules for
US domestic issuers require shareholder approval of all equity compensation plans (as defined in the NYSE rules) regardless of whether
new issuances, treasury shares or shares that the Company has purchased in the open market are used. The TSX rules require shareholder
approval of share compensation arrangements involving new issuances of shares, and of certain amendments to such arrangements, but do
not require such approval if the compensation arrangements involve only shares purchased in the open market. The NYSE rules for US domestic
issuers also require shareholder approval of certain transactions or series of related transactions that result in the issuance of common
shares, or securities convertible into or exercisable for common shares, that have, or will have upon issuance, voting power equal to
or in excess of 20% of the voting power outstanding prior to the transaction or if the issuance of common shares, or securities convertible
into or exercisable for common shares, are, or will be upon issuance, equal to or in excess of 20% of the number of common shares outstanding
prior to the transaction. The TSX rules require shareholder approval of acquisition transactions resulting in dilution in excess of 25%.
The TSX also has broad general discretion to require shareholder approval in connection with any issuances of listed securities. The
Company complies with the TSX rules described in this paragraph.
| | TransAlta Corporation | 2022 Management Proxy Circular | 2 |
Appendix “B”
– General Governance Guidelines
TransAlta Corporation
General Governance
Guidelines for the Board
The Board of Directors (the “Board”)
is responsible for overseeing the management of TransAlta Corporation (the “Company”) by establishing key policies and standards,
including policies for the assessment and management of the Company’s principal risks, for reviewing and approving the Company’s
strategic plans and for hiring the President and Chief Executive Officer (“CEO”). The Board has the statutory authority and
obligation to act honestly and in good faith with a view to the best interests of the Company, including all shareholders and its stakeholders.
Although the Board is responsible for the stewardship of the Company, it has delegated to the President and CEO (the “CEO”)
and the senior management team the day-to-day leadership and management of the Company. The Board monitors and assesses the performance
and progress of the Company’s goals through candid and timely reports from the CEO and the senior management team.
The Board has adopted the following guidelines
to meet its governance responsibilities.
| B. | Board Organization and Membership |
| 1) | Independent Chair of the Board |
The Board has chosen to separate the positions
of chair of the Board (“Chair”) and CEO. The Chair is elected to the Board annually by the shareholders and is independent
from management and the Company.
| 2) | Chair Position Description |
The Chair’s responsibilities are set out
in a position description that encompasses the Chair’s role as it relates to the Board, its committees, the CEO and the Company
generally.
It is the view of the Board that 9 to 14 directors
are sufficient to provide a diversity of expertise and knowledge, permitting effective committee organization and is appropriate for
efficient meetings and decision-making.
The Governance, Safety and Sustainability (the
“Committee”) reviews annually the size of the Board and recommends changes in size and composition to the Board when appropriate.
| 4) | Independence of Directors |
The Board annually affirmatively determines the
independence of each director, based on the recommendations made by the Committee. An independent director is a director who is independent
of management and who has no direct or indirect material relationship or any other relationship which could, in the view of the Board,
be reasonably expected to interfere with the exercise of a member’s independent judgment. In making this determination the Board
adheres to the requirements of Canadian and US securities and stock exchange rules and regulations. Each director is required to complete
an annual declaration of interest identifying all executive and board positions held by that director and whether any relationships exist
with the Company or any of its subsidiaries and affiliates. The Committee reviews these declarations annually to ensure the majority
of directors are independent. The Board also undertakes this determination upon the appointment of any new director to the Board.
Any former officer of the Company serving on
the Board is considered to be non-independent for purposes of corporate governance until such time as the applicable regulatory cooling
off period has been met and the independent directors determine that no direct or indirect material relationship exists, taking into
consideration the former executive’s duties and relationships for and with the Company.
As a matter of policy, the Board is comprised
of a majority of independent directors. Decisions on matters of corporate governance and executive compensation are reviewed and made
by the independent directors or a committee of independent directors.
| 5) | Majority Voting for Directors and Form of Proxy |
The Board believes that each of its members should
carry the confidence and support of its shareholders. Directors stand for election each year at the annual meeting of shareholders. Shareholders
are given the opportunity to vote in favour of, or to withhold from voting for, each director nominee individually.
| | TransAlta Corporation | 2022 Management Proxy Circular | 1 |
In an uncontested election of directors at a
shareholders’ meeting, the votes cast in favour of the election of a director nominee must represent a majority of the shares voted
and withheld for the election of the director. If that is not the case, the director nominee is required to promptly tender their resignation
for consideration by the balance of the Board. A director who tenders a resignation pursuant to this policy will not participate in any
meeting of the board or any committee of the board at which the resignation is being considered. In the absence of extenuating circumstances,
it is expected that the Board will accept the resignation in a time frame consistent with the interest of the Company and in any event
within 90 days from the date of the relevant shareholders’ meeting. The resignation will be effective when accepted by the Board.
Should the Board determine not to accept the resignation, it will issue a press release setting forth the reasons for that decision and
shall forthwith provide a copy to the Toronto Stock Exchange and such other regulatory bodies to the extent required pursuant to applicable
law, including the rules of any exchange on which the Corporation has listed securities.
| 6) | Criteria for Board Membership |
Each year the Committee reviews the composition
of the Board in order to ensure that it has the best mix of skills and experience to guide the long-term strategy and ongoing business
operations of the Company. This review takes into account diversity of background, skills and experience, gender, ethnicity, age, stakeholder
perspectives and geographic background. Further, consideration is given to any upcoming retirements, succession needs, specialized committee
membership requirements, industry, market and the strategic direction of the Company. The information is compiled through the use of
a questionnaire which identifies the skills, education and experience of each current director and those factors needed to promote diversity
and to lead the strategic direction of the Company. This information is then compiled into a matrix.
If a vacancy or a particular need arises, the
Committee, together with the Chair, identifies potential nominees through the assistance of a professional search firm, or its evergreen
candidate list, screens their qualifications and fit for the Board following which the Committee makes a recommendation to the Board
for appointment or election. The Board is responsible for nominating candidates to the Board for election by the shareholders and to
appoint directors as the number of positions or skill requirement warrant between annual meetings.
| 7) | Change in a Director’s Principal Occupation |
A director who makes a significant change in
principal occupation must advise the Board in order to give the Board the opportunity to review, through the Committee, whether such
change may have an impact on the Company.
| 8) | New Director Orientation |
New directors are provided with an orientation
and education program which includes written information about the duties and responsibilities of directors, the business and operations
of the Company, minutes and material from recent Board and committee meetings, one-on-one meetings with senior management and Board members
and site tours. A comprehensive director’s manual is also provided to each new director. The orientation of each new director is
tailored to that director’s individual needs and areas of interest. Specialized and independent training is also available from professional
organizations if required or requested.
| 9) | Ongoing Director Education |
Each director is responsible for keeping informed
about the business of the Company and developments in the industry. Management assists directors by providing regular updates at each
in-person board meeting on various topics relating to the business, developments in the industry, political and economic developments
in the geographical areas in which the Company is active and in the general market place. The Board also receives regular communications
from the CEO on developments in the business, progress of the Company towards the achievement of its established goals / strategy and
updates on relevant topics of interest.
In addition, management engages external speakers
from time to time to make presentations to the Board and management on matters affecting the Company, the industry or the market place.
Directors also take part in tours of the Company’s facilities and suppliers and participate in management presentations on the
operations of different aspects of the Company’s business. These presentations, discussions and tours facilitate increased discussion
between management and the Board and provide members of the Board with additional knowledge and context for exercising their duties.
Directors are also encouraged to participate
in professional development courses and to maintain membership in professional associations that provide continuing education to directors.
All costs associated with such memberships or development courses are reimbursed by the Company.
| 10) | Retirement Age and Succession |
The retirement age for Board directors is 75,
provided the Board may, at its discretion, extend the term of a director beyond the age of 75 if the Board determines that the Company
and the Board would benefit from the continued service of such director.
The Committee reviews annually the size and composition
of the Board and addresses the succession planning needs associated with ensuring the Board has the necessary skills and experience.
The Board also considers the need for continuity of members on the Board balanced against the need for new skills and perspectives to
address the direction of the Company.
The Committee annually reviews the Chair and
directors’ compensation and makes recommendations to the Board for consideration when it believes that changes in compensation
are warranted. In making this determination the Committee considers the market competitiveness of its compensation against companies
of similar size and scope in Canada and within its Comparator Group in Canada. The Committee also reviews the compensation data compiled
by independent firms in assessing the competitiveness of its compensation.
| | TransAlta Corporation | 2022 Management Proxy Circular | 2 |
The Board has determined that ownership of the
Company’s shares or Deferred Share Units (“DSUs”) by directors is desirable and aligns the interests of directors with
those of the Company’s shareholders. A portion of the director’s annual retainer fee is paid in shares or DSUs of the Company.
The Company has established a minimum share and/or DSUs holding requirement, which requires each director of the Company to acquire and
hold a minimum value of three times the director’s annual retainer fee within five years of their appointment to the Board. In
addition, newly appointed directors are required to acquire and hold the equivalent of one time their annual retainer fee within two
years of their appointment to the Board.
| C. | Board Meetings and Materials |
The Chair and the CEO, together with the Executive
Vice President, Legal, Commercial & External Affairs (the “VP, Legal”) and Corporate Secretary or Assistant Corporate
Secretary, establish the agenda for each Board meeting, ensuring that all matters to be addressed as provided in these guidelines form
part of the scheduled agendas for the year. In advance of each meeting, management distributes to the Board written information and data
necessary for the Board’s understanding of the business to be conducted at the meeting. Any Board member may suggest the inclusion
of additional items on the agenda.
A majority of the members of the Board, present
in person or by telephone or other communication device that permits all persons participating in the meeting to speak to each other,
shall constitute a quorum.
| 3) | Meetings and In Camera Meetings |
Members of senior management are invited to attend
Board meetings as required.
The independent directors meet without management
present as a standing agenda item at each regularly scheduled, in-person Board meeting. The Chair discusses with the CEO any matters
which may have risen during these meetings that are relevant for the CEO or management.
| D. | Committee Organization and Meetings |
Each committee operates according to an approved
charter. The standing committees of the Board are: Audit, Finance and Risk, Human Resources, and Governance, Safety and Sustainability.
The Board may form a new committee or disband a current committee if, in its view, it is appropriate to do so, provided that the Board
will always have an audit committee.
| 2) | Assignment of Committee Members |
The Board, based on a recommendation of the Committee,
appoints committee members and committee chairs. The Committee’s recommendation is derived from consultations with the Chair, with
individual directors and with the objective of utilizing particular expertise while recognizing and balancing the need for renewal of
ideas and continuity of knowledge and leadership.
Committee chairs, in consultation with committee
members, determine the frequency (consistent with each committee’s Charter) of committee meetings. The Audit, Finance and Risk
Committee and Governance, Safety and Sustainability Committee meet at least quarterly, the Human Resources Committee meets at least four
times annually and the Investment Performance Committee meets as required. Each committee reports to the Board with respect to the proceedings
of its meetings. The independent directors meet without management present as a standing agenda item at each regularly scheduled committee
meeting.
The chair of each committee, in consultation
with the appropriate members of management and the VP, Legal and Corporate Secretary or Assistant Corporate Secretary develops the committee’s
agendas. Through the use of a checklist linked to its Charter, each committee ensures that all matters to be addressed, as set out in
its Charter, form part of its schedule of agendas for the year.
| | TransAlta Corporation | 2022 Management Proxy Circular | 3 |
| E. | Board and Management Responsibilities |
| 1) | Board Relationship with Management |
Board members have open access to management
for relevant information and management is encouraged to make appropriate use of the Board’s skills. Open discussions between the Board
and members of management about issues facing the Company are encouraged. The Board also encourages senior management to bring employees
who have potential as future senior leaders, and who would benefit from exposure to the Board, into Board meetings from time to time.
| 2) | Appointment of Chief Executive Officer |
The Board, at the recommendation of the Human
Resources Committee (the “HRC”), is responsible for the hiring and appointment of the CEO, including the approval of his/her
compensation and any employment agreement.
| 3) | Evaluation of the Chief Executive Officer |
The HRC conducts an annual review of the performance
of the CEO as measured against objectives mutually established by the HRC and the CEO, and approved by the Board. The Chair of the Board
and the chair of the HRC communicate the performance evaluation to the CEO and to the Board. The HRC utilizes this evaluation to make
recommendations to the Board with respect to the CEO’s variable compensation for the year.
Management is responsible for the development
of the Company’s strategic direction and plan. It is the role of the Board to review, question, contribute, and approve the strategic
plan of the Company and to oversee its execution. The Board dedicates time annually to review, discuss and approve the Company’s
strategic plan, receives updates at each regularly scheduled Board meeting and receives periodic updates from the CEO.
| 5) | Limits to Management Authority |
The Board has established general authority guidelines
that identify the limitations to management’s authority and also delineates the areas of responsibility that require the involvement
of the Board. Some of these areas include material organizational changes, policy development, budgets, material financial plans and
commitments as well as corporate and substantive personnel matters. These guidelines place limits on management’s authority based upon
the nature and size of the proposed action.
| 6) | Succession Planning and Management Development |
The CEO presents annually a detailed report on
management development and succession planning to the HRC. The CEO, together with the HRC, also identifies, on a continuing basis, a
successor in the event of the unexpected incapacity of the CEO. The HRC reviews and approves management’s succession plans and
reports to the Board on these plans as required but at least annually.
The Board is responsible for understanding the
principal risks associated with the Company’s business and for ensuring that management has implemented appropriate strategies
to manage these risks. It is the responsibility of management to ensure that the Board is kept well informed of these changing risks
on a timely basis.
i) Enterprise Risk Management
The Board has delegated to the Audit, Finance
and Risk Committee (the “AFRC”) the oversight of management’s assessment of the Company’s principal risks. Management
has adopted a comprehensive Enterprise Risk Management system which focuses on risk identification, risk classification, mitigation and
identification of both residual and tail risks. These are construed within the risk appetite approved by the Board. Management reviews
quarterly with the AFRC the Company’s risk scorecard and residual risks including the identification of risk profile changes if
applicable. The AFRC reports to the Board quarterly on this review. The Board undertakes a comprehensive review of management’s
assessment annually and its response plan.
Management also undertakes a comprehensive risk-reward
analysis of all projects and growth opportunities brought to the Board for approval.
| ii) | Compensation Risk Assessment |
The Board has delegated to the HRC the oversight
of risks related to compensation. Management has adopted a risk review framework which, as part of its overall Enterprise Risk Management
review, assesses the Company’s risks relating to compensation and focuses on the areas in which the Company would be most vulnerable.
The Board has adopted a clawback policy to deter inappropriate risk-taking activities. The HRC undertakes an annual comprehensive review
of compensation risk and reports to the Board thereon.
| | TransAlta Corporation | 2022 Management Proxy Circular | 4 |
The Company continually seeks to establish controls
relating to financial or other matters that give the Board appropriate assurances that its responsibilities are discharged. The Company
has adopted a framework for the assessment of internal controls and together with the internal and external auditors provide regular
reports to the AFRC which then reports to the Board.
The Company has a Code of Conduct that sets out
the key principles and policies governing the organization and has adopted a separate code of conduct for employees engaged in financial
reporting and for those engaged in energy marketing. The Board, through the AFRC, reviews the report of employees with respect to their
compliance with these codes, the key financial policies of the Company, and is informed of any exceptions arising under any of the codes.
| 9) | Insider Trading and Disclosure Practices |
The Company has adopted an Insider Trading Policy,
which is reviewed annually by the AFRC and reported to the Board. The policy requires, among other things, that directors and officers
adhere to a trading blackout when in possession of material non-public information. All directors and officers, who are considered insiders
of the Company, must consult with the VP, Legal, Corporate Secretary or Assistant Corporate Secretary before trading in the Company’s
securities and provide confirmation immediately following any trade.
To facilitate and foster relations with shareholders
and other stakeholders, the Company has adopted a shareholder engagement policy and a disclosure policy that addresses the timely dissemination
of all material information. The disclosure policy also requires that the chair of the AFRC review and approve the release of financial
information derived from the Company’s financial statements. The Company also has an insider trading policy that prohibits any
employee in possession of material undisclosed information from trading in the Company’s securities prior to such information being
disclosed to the public. These policies are reviewed annually by the AFRC or Governance, Safety and Sustainability Committee, as applicable,
and are reported to the Board.
| 10) | Outside Advisors for Individual Directors |
If any individual director requires the services
of an independent advisor to assist him/her with matters involving his/her responsibilities as a Board member, he/she may engage such
an advisor at the expense of the Company provided that he/she has first obtained the authorization of the Chair. The director shall adhere
to the principles enunciated in the Charter of the HRC in determining the independence of the advisor.
| F. | Evaluation of the Board and the Board-Management Relationship
|
| 1) | Assessing the Chair’s Performance |
In each year of the Chair’s term, the Chair
of the Committee, as a component of the Board evaluation questionnaire and through one-on-one interviews with each director, performs
an evaluation of the Chair’s performance, measured against the Chair’s position description. The Chair of the Committee summarizes
the results, discusses the assessment with the Chair and reviews the results of this assessment during an in camera discussion
with the Board. The results of this review form the basis for objectives for the Chair for the upcoming year. In addition, prior to the
expiry of the Chair’s first term, these reviews form the basis for the Committee’s recommendation to the Board with respect
to the renewal of the Chair’s term.
| 2) | Assessing the Board, Committee, Individual Director Performance
and Board-Management Relationship |
The Chair meets annually with each director to
obtain their views on the effectiveness of the Board, Board committees, the Board-management relationship, individual director contributions
and performance, management contributions and overall workings of the Board. To facilitate these one-on-one meetings, questionnaires
relating to Board and individual committee assessments are provided to each director for completion on an anonymous basis. The questionnaires
address specific topics and questions for discussion, including (among others) an overall assessment of the Board’s performance
in the discharge of its duties and responsibilities, whether the Board is satisfied with the strategic initiatives of the Company, the
Company’s risk management processes, the Company’s disclosure processes, the management succession plan, the Board’s
relationship with management, the quality and timeliness of information provided to the Board in preparation for meetings, the operation
of the Board and its committees and the contributions of each director.
The Chair also utilizes the information obtained
during this evaluation to identify areas of improvement and objectives for the upcoming year and communicates this information to the
Board during an in camera discussion. In addition, the Chair provides individual directors feedback on the evaluation conducted
by their peers and provides direction on areas for improvement if necessary. The information is also utilized by the Chair to provide
feedback to the CEO on his/her performance and for communication to the senior management team for improvements in areas that will assist
the Board in the discharge of its responsibilities.
| | TransAlta Corporation | 2022 Management Proxy Circular | 5 |
| G. | Communication and Shareholder and Stakeholder Relations |
| 1) | Board Communications Policy |
The Board, or the appropriate committee thereof,
reviews and approves the content of the Company’s major communications to shareholders, other stakeholders and the investing public,
including the quarterly and annual reports, the proxy circular, the annual information form and any prospectuses and supplements that
may be issued.
The Board believes that it is generally the function
of management to communicate with the investment community, the media, customers, suppliers, employees, governments and the general public
on management and operational matters.
| 2) | Shareholder and other Stakeholder Communication |
The Board believes that it is important to have
constructive engagement with its shareholders and other stakeholders and has established means for the shareholders of the Company and
other stakeholders to communicate with the Board in accordance with a Shareholder Engagement Policy. The contact information for communicating
with the Board is contained in the Shareholder Engagement Policy and is also published annually in the Company’s annual report.
Shareholders and other stakeholders may, at their option, communicate with the Board on an anonymous basis.
In addition, the Board has adopted an annual
non-binding advisory vote on the Company’s approach to executive compensation. The Company is committed to ensuring continued good
relations and communications with its shareholders and other stakeholders and will continue to evaluate its practices in light of any
new governance initiatives or developments.
| | TransAlta Corporation | 2022 Management Proxy Circular | 6 |
